How to increase your profit

In business, your profits are your reward for your endeavours. In fact, profitability is the only reliable measurement of a business' success. Profits are the very lifeblood of a business. They fuel growth, support the owners, provide for the well being of the staff, and ultimately determine the success or failure of the business. So how can you increase your profits?

Gross profit

The objective is either to expand sales income while controlling direct costs, or reduce direct costs to increase gross profit.

You should ensure that:

  • You know your market and your competitors
  • Your product knowledge is complete and you are technically able in all aspects of the business
  • Your service is of high quality, delivered on time and according to specification
  • You take advantage of cost-effective means to increase sales - consider recommendations, promotions, leaflets, press releases, and adverts

Warning - Be wary of dropping prices to boost sales. The increased volume may not be sufficient to cover the reduced gross profit margin

  • Your direct costs are kept to an absolute minimum. Most businesses should aim to reduce direct costs by at least 5% every year. Look carefully at material and labour costs, as well as production methods. Be flexible and innovative in seeking more cost-effective solutions

Warning - Before changing your supplier, consider the level of service you are receiving as well as the cost

  • If you charge a rate for a job it is important to ensure that you use your working time effectively. On average, a self employed trader should endeavour to charge for 35 hours per week, and receive not less than £450 for that time. Keep a timesheet so you can monitor and adjust your use of time

Overheads

You should aim to keep costs under your control:

  • Expenses - Keep your business expenses to an absolute minimum, and ensure that any additional overheads you assume result in increased profitability/efficiency
  • Increasing your overheads - Are you satisfied that for all new overheads you have reviewed the market to establish where to place your orders? Reliability and backup service are important factors to take into account. The cheapest may not be the best for your business
  • Where assets are acquired on finance - Be sure to obtain quotations for your finance from your suppliers, your bank, and a finance company. Check with us to see if your finance costs could be reduced
  • Reviews - Many businesses could benefit from a regular review of their telephone and insurance costs. Even bank charges can often be reduced
  • Credit - Control your credit account customers closely to avoid bad debts

Summary

You must be aware of your income and expenditure. Proper books and records are essential for monitoring the trends and patterns in your business.

It is not necessary to produce a full profit and loss account every month, rather select the key factors that will best help you understand how you are doing, e.g. chargeable hours, sales volume, wastage, and materials used. Compare these figures with previous months, and with your targets.

Do call us if you would like further help or advice on this subject.

SJD Accountancy

SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

  • Unlimited face to face meetings. This is a unique service only SJD Accountancy offers - unlimited face to face meetings across the UK - tax is complicated and sometimes only a meeting will do.
  • UK's Largest contractor accountants with more qualified staff. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant face to face.
  • Money back service guarantee. All your Emails received by 4pm on any normal working day will be answered the same day. Should it be necessary to leave a telephone message it will be answered same day/following day latest or we will make a full refund of that months fee.
  • Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market, including: Best Accountant for Contractors, Accountant of the Year and Best Professional Service Team to name just a few.
  • All inclusive low cost fixed fee accountancy package which includes completion of accounts*, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, your own dedicated accountant* and all company returns for a fixed fee starting from £120 plus VAT per month. Check our packages for more detail.

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 01442 275789 or email: janice@sjdaccountancy.com. Our new client services helpdesk is open Monday to Friday (8am to 6pm).

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again.

Form your own Limited company with SJD - our same day online company formation service includes company bank account set up, VAT/PAYE registration and advice on optimum share structure. 

You may also find the following pages, guides and case studies useful:

*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.