How Do We Turn Your Business Into A Profitable Small Business Australia?
Every business, whether big or small, dreams of generating income and being profitable. But how do you measure profitability, anyway? You may be good at running your business, but chances are you’re clueless when it comes to monitoring its overall health. With all these figures and numbers, it can be difficult to know what to track. That’s what we’re here for. We’re here to make sure that your business financials, from simple bookkeeping to complex tax filings, are on the right track to maximise your income and everything else in between. However, how exactly do we measure a profitable small business Australia?
What Makes a Business Profitable?
Being a profitable business is more than just having money in your bank account. Here are steps to make sure your business is profitable and how to stay on top of your game:
Check Your Net Profit Margin
Net profit is a key number in determining your business’s profitability. Here’s a quick formula to calculate net profit:
Revenue – Expenses = Profit
A positive number means you’re turning a profit, a negative number means you’re losing money, while zero means you’re breaking even. For example, if your business makes an $80,000 annual revenue with a $10,000 expense, that means you have a net annual profit of $70,000.
It’s safe to say that you have a profitable small business Australia. However, we don’t just look at profits annually but monthly as well. Is your profit the same each month, or is it increasing or decreasing (and how fast?) This allows us to predict future profit or make a plan to stop your profit from going down and flatlining.
Calculate Gross Profit Margin
Gross profit refers to your profitability if you’re selling physical goods. We use this formula for calculating gross profit:
Sales Revenue – Sold Products Cost = Gross Profit
Labour, materials, and overhead costs make up the cost of products sold. Meanwhile, gross profit margin means what percentage of profit you’re keeping compared to how much your product costs. The formula is:
Gross Profit / Sales Revenue = Gross Profit Margin
A profitable small business Australia involves a higher percentage since it means you’re keeping more profit compared to the product cost. Anything below 50% means your product costs over half of your sales revenue.
A lower percentage is fine if the sales volume is high enough to pay expenses. What gross profit margin shouldn’t be doing is decreasing—if that happens, we will find a way to lower product costs or raise your prices. On the other hand, if the gross profit margin is good but the net profit decreases, maybe it’s time to look at overall expenses and see where we can adjust.
Check Operating Expenses
To be a profitable small business Australia, your expenses shouldn’t increase faster than your revenue.
This is when we check your profit and loss statement and look at “total expenses.” We check your expenses per month and compare them to your revenue per month to find a trend. However, some higher expenses are inevitable, such as adding a new employee or buying new equipment. It varies per industry, where some need more capital than others.
Analyse Profit per Customer
Some customers bring more profit than others. But sometimes, those who seem the most profitable—or those who pay huge fees—aren’t always the most profitable. Your smaller customers may even be more profitable because their revenue to expenses ratio is better.
Remember that to be a profitable small business Australia, expenses should be lower than the overall cost. Unfortunately, we can’t rely on accounting software to measure profit per customer so we use this formula:
Total Fees – Expenses = Gross Profit
Gross Profit / Hours = Hourly Wage
We compare your hourly wage per project. We’ll then advise you to focus more on a project or customer where you get a higher hourly wage.
List Future Projects
Profit must be spread evenly throughout the year to help with cash flow. But this doesn’t always happen since you may be too focused on doing one project that you forget to line up your next one.
This is why we keep a list of projects somewhere you can see it. If the list is short, you can try upping your marketing and advertising strategies to attract potential clients.
How Can We Help Make a Profitable Small Business Australia?
A great bookkeeper is key to making your business grow. Here are some reasons we’re a good addition to any business:
We Help You Save on Tax Money
Because we can keep better records, we can ultimately help improve your tax return. No business wants to owe the government, and we can help you navigate the waters to make sure you get a tax refund instead of owing the ATO some money.
And since we keep important documents properly organised, tax season becomes a breeze. We’ll help you claim the right deductions, prevent audit expenses, and avoid having incorrect records.
We Stress About Finances
Our job is to turn your business into a profitable small business Australia. We’re here to prepare the reports and check that all expenses are paid.
We keep books organised so you don’t stress about unnecessary things. Managing a business is stressful enough. Just focus on what you’re good at and let us handle the rest.
We Help You Get Investors
Investing is a huge risk and investors want to make sure where they’re putting their money in has potential. They like raw numbers and expect to have all the details ready before making a decision.
As bookkeepers, we’re here to prepare financial reports so they can see everything as transparently as possible. With clear and concise books, they’ll more likely consider your business and want to get involved.
Why Entrust Your Profitable Small Business Australia to Us?
For a small business to experience growth, a bookkeeper becomes a need and not just a necessity. We hope this post has shown how you can benefit from our services and how we can help with your business’s financial aspect.
For bookkeeping advice or other business consulting services, don’t hesitate to drop us a line today!