By Avi Bendetsky, CEO BAS & MORE Bookkeeping & Virtual CFO
Can you imagine driving a car with broken gauges? What about trying to land a plane just by looking out of the windscreen? If your reply, ‘It’s too dangerous and puts my life and the lives of my loved ones at risk’, you are 100% right!
Well, guess what. You’ll probably be shocked to find out that despite working really hard, most SMEs don’t have a clean data or solid accounting and business growth systems in place, just hoping that things will somehow turn out fine.
As a result of poor financial data, these businesses decrease efficiency, systematically lose revenue, don’t make educated decisions and put their business at risk.
Analysing numbers is a critical aspect of growth no matter how big or small your business is. If you don’t know where you’re heading, how can you take your business to the next stage?
Thankfully, July is a great time for new beginnings and improvements, with the end of the financial year madness behind us.
Follow these 4 proven strategies (plus 1 to avoid at all costs) to improve your bottom line and make this year more profitable and productive:
1. Analyse Your Gross Profit Rates
Measuring your gross profit rates helps to identify how profitable is your business. One of my clients, who was doing quite well, recently asked me to analyse his product sales turnover, which almost doubled. The problem was that even though he was making more sales, there was no money in the bank!
By measuring the gross profit rate and splitting the products before and after the sale, I found a price discrepancy caused by a typo in the price. This explained why the increase in sales resulted in dropped profitability!
2. Forget Fortune-Telling and Guide your Business with a Reliable Budget
Having a budget is one of the most efficient ways to save you a million headaches and wasted funds, giving you peace of mind about your future.
If you want to guide your business without wondering where to get the money from, you need an accurate budget.
It will help you:
• Gain financial control, smooth cash flow, clear projections on cyclical expenses, revenue and growth.
• Analyse your current business trends and significantly reduce risks and frustrations.
• Impact your viability to access growing capital from banks and investors allowing vested parties to have a clear vision of your company’s development.
• Make educated decisions and plans resulting in stable business growth.
If you need help with setting up your budget, download my free practical guide to streamlining cash flow and budgets and increasing profits without going nuts, 7 Steps to Overcoming Your Business Anxiety.
3. Compare Your Cash Flow Against Your Budget
While having a budget is great, it becomes useless unless you make adjustments based on your business trends.
In most accounting systems such Xero or MYOB, you can input your budget and run Budget vs. Actual Report to determine if your actual performance matches your projections. Do it monthly and adjust projections if necessary.
4. Introduce Staff Key Performance Indicators (KPIs)
Hopefully, your employees are delivering amazing results already. But what if it’s not exactly the situation?
What is the best way to measure your staff performance and help them achieve better results and develop professionally?
The answer is — Implementing staff KPIs.
KPIs are about building on strengths, improving areas that need upskilling and setting up measurable goals.
Every one of us wants to become more efficient and professional in our roles, and your staff are no exception. However, if your employee does not feel confident about a certain task, what are the chances you’ll be the first to know?
Having KPIs in place allows you to address strengths and weaknesses of each employee, which results in improved performance and productivity.
5. Inaction – A Strategy to Avoid at All Costs
If you are not actively investing in your business growth and optimising workflow systems on a regular basis, you are going backwards.
It comes to a realisation that stagnation and self-sabotage is a major killer of any business.
Unsure where to start to change the situation and make your business more profitable? Get professional advice from BAS & MORE Bookkeeping & Virtual CFO. After all, it’s impossible to be great at everything, and that’s why we are here to help.
So, if you believe in steady business growth but need a hand, call us on 1300 227 770 or email firstname.lastname@example.org today. Talk Soon.