As a business owner or operator, you are likely all too aware of the nuances of keeping up with a business’ financial status. Profits are something that are constantly changing, and calculating how much money you are making is not as simple as it might seem. If you feel frustrated with your current process of monitoring your business’ financial progress, perhaps it is time to move to another method. There are a few steps that you can take to reduce your stress in this area of business, including these five tips.
1. Keep Accurate Records
If you are not keeping a general ledger of all of your expenses and profits, you will never be able to track how well your business is doing. You can use a paper ledger if you prefer to do things the old-school way, or you can use an electronic one. An automated ledger for your business account can make your life much easier. Your company accountant will also appreciate the simplicity of keeping up with expenditures and income. Just be sure that you are logging information on a regular basis, whether it be daily, weekly or monthly.
2. Consider Overhead Costs
Overhead costs are any expenses that you must pay just to keep your business open. For example, if you are a cosmetologist, your overhead costs might include hair dye, hairspray, curling irons, hair cutting shears and a phone to accept client calls. If you operate a medical office, you will need gloves, sterilization equipment and computers just to remain functional. When monitoring the financial status of your business, it is important to examine each and every overhead cost. Make a list of everything you have to buy to keep your doors open each month.
3. Reduce Overhead Costs
Once you know what your overhead costs are, you can take steps to reduce them. For example, as a cosmetologist, you might find a less expensive phone company to support your line. As a doctor, you might find a brand of gloves that costs less per box. The more you shave off your overhead costs, the higher your actual profit will be. You may get discounts through your suppliers for buying products in bulk, so this can be worth looking into. You may also be paying for things that your business no longer needs or uses, and you should identify and eliminate these costs.
4. Consider Profit on Sales
No matter what type of industry you are in, you must understand what your bottom line profit is. If you sell clothing, you must factor in how much the garment cost you (including shipping costs), your monthly rent for your boutique and your employee payroll. All of these factors will matter when setting prices on your goods or services. You are not only selling a shirt; you are selling your time and your overhead costs. If you are having a hard time figuring out how much you should be charging for services, consider consulting an average price calculator for your area.
5. Make Adjustments to Sales
Once you see how much each product or service in your business is truly worth, you can better set a price for selling. You may find that you are charging too much, and that could be a reason for a drop in clients. You may find that you are charging too little, and your business may be suffering for it. It is important to find the right balance between making a steady profit and overcharging for your goods and services.
For many business owners, managing the financial aspect of operations is the most stressful task. However, when you follow a few simple rules, you can be on your way to making it less stressful. Watching the profit margin of your business may always cause some anxiety. However, when you are confident in your research and skills, you can look forward to profiting in your business for years to come.
