Just because your business is busy doesn’t mean it’s profitable.
A full schedule, constant phone calls, new jobs and money coming into the bank can make it feel like business is booming.
But are you actually making more money?
It’s possible for your sales to increase while your profit goes backwards. Rising wages, material costs, insurance, vehicle expenses and loan repayments can all reduce the money your business keeps.
This is why turnover alone doesn’t tell the full story.
To understand how your business is really performing, it’s important to regularly review:
• Gross profit and net profit
• Profit margins on jobs and services
• Wages compared to revenue
• Everyday operating expenses
• Outstanding customer invoices
• Cashflow and upcoming payments
For example, a trade business might increase its annual turnover from $600,000 to $850,000. While that sounds like great growth, higher staffing costs, equipment repayments and rising expenses could mean the owner is actually taking home less.
If your business is bringing in more work but there’s never much money left, it may be time to look beyond sales.
Sometimes the answer isn’t finding more customers or taking on more jobs. It could be reviewing your prices, improving job margins, reducing unnecessary expenses or collecting outstanding invoices sooner.
Understanding which jobs make you money and which ones are costing you is an important part of running a successful business.
At PLH Accountants, we help business owners understand their numbers, identify opportunities to improve profitability and make informed decisions about their future.
Because a full calendar might look impressive, but a profitable business is what really matters.
If you’re working harder than ever but aren’t seeing the financial results, get in touch with our team. We can help you understand where your money is going and how your business could perform better.