Improve Profitability through One Page Profit Reports
Even in the best of times a prudent business owner will be seeking ways to improve profitability. There is always work to be done in the constant quest to improve profits….. Can sales volumes be increased ? What else can we offer to existing customers who know and trust us ? How can we identify opportunities for cost savings ? How effective is our marketing spend ?
Implement and Maintain Financial Controls
The quest for improved levels of profit is always a challenge even in the best of businesses. An adequate level of sales, your experience as a business operator and a sufficient level of capital are all important. However, without solid financial controls in place consistent long term improvement in profits is unlikely to be achieved. As a business owner it is so important that you regularly set time aside to identify any important financial management issues as quickly as possible after they arise and then fix them fast. The consistent implementation and maintenance of effective the financial controls are vital to long term business success.
Using One Page Profit Reports to Improve Profitability
PLC’s and the largest private companies have detailed management accounts prepared on a monthly based. Typically these are available within two weeks of the month end, the sooner the better. The monthly management accounts are then carefully studied to identify trends, problem areas and ways to improve profitability within the business.
We strongly recommend all businesses to prepare a One Page Profit Report at least quarterly and ideally monthly. For most independent business owners introduction of at least quarterly profit reports will greatly help in the vital task of monitoring and improving profitability.
Regular profit reports let the business owner closely monitor sales, gross margins, wages costs, overhead costs and net profitability. In this way problem areas within the profit report are identified at an early date and remedial action can be quickly taken. All businesses suffer from downward pressure on sales levels and margins and upward pressure on wages and overhead costs. A vital part of improving profitability is to respond fast if the profit report reveals disappointing results before any more profit simply bleeds away from your bottom line.
If profit reports are not regularly prepared and carefully analysed an unidentified problem can suck profitability out of a business for far too long . In this scenario it may only be the annual statutory accounts that reveal the disappointing level of profits and these may not be finalised until perhaps seven or eight months after the year end. That’s far too long to let valuable profit bleed out of your business.
Use Xero for Easy Production of Profit Reports
I’m a big fan of the Xero cloud accounting package. It’s very user friendly, inexpensive and it helps take the drudgery out of producing regular profit reports. I urge you to have a look at the Xero website and take out a subscription for your business : www.xero.co.uk
If you have any questions about how Xero might help you improve financial management in your business please don’t hesitate to get in touch with me :-
Email : jim@jwmbusinessadvice-accountancy.com
Until the next time
Jim