In business, the profit is your reward for all the hard work you have put in, and it is the key indicator of your business' success. Profit fuels growth, provides the lifeblood of a business and it determines success or failure.
In order to expand sales while controlling or reducing direct costs to increase gross profit, business owners and managers must ensure that:
– You know your market and your competitors
– You are technically competent on all aspects of your business and you know your products like the back of your hand
– You offer a quality service which is delivered in a timely manner and according to agreement
– You use sales driven strategies which are cost effective and within budget
– Keep direct costs down by looking carefully at your suppliers (materials, service level and costs), as well as your labour costs and your production methods.
SME business owners remain competitive by keeping up with the changing times and listening to and meeting the needs and expectations of their customers. Flexibility and innovation is key to finding more cost effective solutions to driving down costs and increasing profits. Keeping on top of your overheads is also an important aspect of business management.
– Your expenses should be closely monitored and kept to an absolute minimum
– Check that your suppliers are reliable and that a back up service is in place if required – and remember that the cheapest is not always the best for your business!
– Seek alternative means of sourcing funding which is tailored to best suit your individual business requirements. There are various funding options available to you to release cash flow from the assets of your business. Invoice discounting and invoice factoring, for example, can provide a valuable source of funding for SMEs in helping to improve cash flow
– Conduct bi-annual reviews of your telephone and insurance costs, and your bank charges, for example
– Where you have clients with credit accounts, monitor them closely. UK SMEs wrote off a combined ￡5.8 billion of bad debt in the past financial year alone!
– Instruct a professional firm of accountants and business advisers to structure your business with cashflow and profit forecasting to measure performance and maximise opportunities.
It is essential that all business owners and managers be aware of income and expenditure by keeping proper records and monitoring trends and patterns. Profit and loss accounts will help you understand how your business is progressing, as well as alert you to any potential issues which might arise, giving you ample warning to rectify the problems or make the necessary adjustments to keep your business on track and successful.
At Beavis Morgan, our specialists to SMES are available to provide general business advice and to structure your business for tax. We can also assist with long and short term forecasts, budgets, business plans, sensitivity analysis, and calculating and checking compliance with covenants. Through our partner businesses, BM Structured Finance and BM Advisory, we can source and restructure debt finance for SME businesses, as well as assist with resolving issues which can impact on business performance and success, and find innovative solutions for businesses and individuals in distress.