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8 Steps to Boost Profit Margins for Your Company

While it is important to focus on increasing your gross receivables each year, you won’t experience a real boost in profits without also assessing the amount of money that you are spending. It is common for business owners to feel like they are successful with their company because of the large amounts of cash that are coming into the bank account. But, these numbers can be deceiving if you aren’t looking at the overall financial picture.

The main goal is to increase your profitability as much as possible. Extra income can be used for business development, marketing, and other efforts that will improve future success. At the same time, higher profit margins mean that you can enjoy the fruit of your labors.

You can find a million tips online that suggest the best methods to improve profit margins. But, the truth is that business finances can be complicated. In fact, there isn’t one set strategy that works for every company. The best thing that you can do is talk to a financial professional who can assess your business, assets, products, and sales patterns. Make sure that you are utilizing the services of an experienced accounting team who can offer recommendations about the way you are managing your cash flow.

Today, we are sharing some of the most common strategies that can be used to increase business profit margins. If you are interested in learning more information, then we encourage you to talk to our team for personalized recommendations.

1. Maximize Tax Strategy

If you don’t have a good tax plan, then it probably means that you are spending more than necessary on taxes each year. Yes, you are required to pay various taxes on the money that comes in for your company. But, there’s no reason why you shouldn’t take advantage of the tax breaks and write-offs that are available for your company.

The right tax strategy could save you thousands of dollars or more on the money that you send to the IRS. Reducing these tax liabilities will increase the profit margins that are left after you have paid the expenses for your company. Make sure that you are following the tax laws and working with an experienced accountant for help.

2. Watch Invoices and Transactions

It can be easy to get caught up in the daily responsibilities so that you overlook the invoices that are moving through the office. You need to be paying attention to the invoices that are sent by your suppliers. A quick check is essential to ensure that you aren’t being overcharged.

An accounting team can help with the management of your invoices. For example, if there is a pattern set with a particular vendor, then your accountant can bring an invoice to your attention if it is higher than normal. Always pay attention to the details so that you aren’t billed at the wrong rates or charged for products or services that aren’t received.

As a business owner, you can’t keep up with financial records and accounting by yourself. It is essential that you enlist the help of a professional accounting service. Then, it will be easier to identify potential discrepancies or errors in the invoices that are sent to your company.

3. Offer Add-On Services

Do your customers have an opportunity to buy an extra product or service when they are purchasing from your company? When someone has their credit card out to make a purchase, it is an opportune time to increase the amount that they are spending. They’ve already made up their mind that they want to buy from your company, so the hard work is already complete. Now, you just need to show them the services or products that best match their needs.

You don’t have to be overbearing with the add-on services. Instead, provide small suggestions or hints about complementary services that might be considered. You can see an example of this strategy the website of one of the biggest online retailers: Amazon. Every time you are looking at a product, there is a small section that shows other related items that customers selected after viewing the same product that you are ready to buy.

4. Increase Your Prices

Don’t be fooled into thinking that you need to race your competitors to the bottom with the prices that are offered. If customers see the quality of your products or services, then they won’t be too concerned about the price that you are charging. So, don’t waste your time trying to cut costs to bring more people through the door. Competing on price is one of the biggest mistakes that you can make! Instead, look for ways that you can increase the value perception to help customers see why they should be buying your products.

It is interesting to note that sometimes a price increase can actually raise conversion rates. If a customer thinks that your price is too low, then it could send a message that you are offering lower quality products or services. On the other hand, a higher price could be an indication that the customer can trust the quality that is offered by your company.

Find a balance to ensure that you are communicating value without racing your competitors to the bottom of the barrel. You deserve to get paid a fair price for the products and services that are offered. At the same time, your customers deserve to receive the quality products that they are interested in buying.

5. Increase Conversion Rates

How often are you losing customers when they are moving through your sales cycle? You might bring customers to your website or bring them through the door, but are they actually buying something when they arrive? Lead generation is important, but finding new customers won’t be effective if you can’t close the sale. In fact, there is a strong argument that you shouldn’t focus on lead generation until you have optimized close rates.

For website sales, you need to work with an experienced team that understands online conversions. If you are closing the sales in person, then you need to know the right strategies to share information with the potential client that will help to seal the deal. Even small increases in conversion rates can have a big impact on the profit margins.

6. Decrease Overhead Expenses

It is common for businesses to get pulled into recurring expenses. Even though the transactions might seem small, they can add up over time. Calculate the amount of money that you are spending on overhead costs, then look for ways that you might be able to reduce your spending.

For example, are you using two software programs that are redundant in the reporting? If it is possible to combine your efforts into one software system, then you might be able to reduce the amount of money that you are paying to use the software. Additionally, you can also save money on the manpower that is needed for the data entry and information management.

7. Assess Inventory Management

How are you managing the inventory that is moving through your business? Buying inventory is a big expense, so you need to be careful to evaluate sales trends and manage the amount of money that you are spending on inventory. It can be a challenge to find the right balance, but it is possible to improve the process with a little bit of practice.

There are several reasons why you need to manage your inventory. First, you need to be sure that you aren’t tying too much cash up into the inventory that is on site. Next, inventory management reduces the risk that employees or contractors will steal products from your company. If there is an issue with theft, then an investigation can be completed to find the culprit.

Finally, inventory management is important so that you can always have products on hand when customers are ready to buy. If a customer wants to purchase from your company, then you will lose out on the potential sale if you don’t have the right inventory available for the transaction. Not only will the customer go somewhere else to find the product, but you might be losing that person to the competition for future transactions.

8. Personalized Accounting Services

Cashflow and profit margins can be hard to manage if you aren’t watching the financial reports and paying attention to the way the money is moving through your company. Most business owners don’t have the experience to handle these financial tasks without support. If you want to increase your profit margins, then hiring an accounting team might be the best thing that you can do.

For more information about personalized accounting services, you should talk to our team here at Easier Accounting. We specialize in small business accounting, and our team is here to assist with anything that you need. Call today to see if our services match the needs of your company. We are always here to help with your business goals: (888) 620-0770