If you own a business, it’s important that you are making more money than you’re spending. In order to do this, you need to make sure that your product or service is always priced higher than your costs.
It’s important to have an understanding of the true cost of the product or service you are providing. If the cost increases, your price should also increase. Ideally, your business shouldn’t have to absorb money loss that comes with increasing costs.
Raising prices can run the risk of consumer resistance, and this can be a major complication for most businesses. However, slight price increases over time have proven to have little effect on consumers. Online marketing and search engine optimization can be very beneficial for your business to get more customers online.
Evaluate Your Gross Profit
Keeping your prices higher than your costs has to do with gross profit. Gross profit is the difference between the total revenue you’re collecting and the total amount of money you’re spending.
To evaluate your gross profit, you need to fully understand everything you’re spending money on. This could include the creation, packaging and promotion of your product, the materials you’re investing in, and the space you’re working in.
You should also pay attention to how much you’re spending on paying employees. Consider all of your employees, their hourly rates, and the amount of time they work. This, combined, is all of your labor costs.
Ideally, the combination of your labor costs and the costs for creating and distributing your product should be less than the amount of money you’re bringing in. This will result in a profit for your company.
Watch Your Cash Flow
A big problem that many companies have is using up their cash flow simply due to stock and jobs in progress. By making sure that stock spends less time in-store and jobs are finished and invoiced quickly, you can make sure that you aren’t draining your cash flow.
Ideally, your services should be finished quickly. The longer a project takes postpones when the invoice can be delivered, resulting in late payments which can end up being detrimental. Using good record keeping and planning software will help you keep track of your stock and labor.
Quikflw is a great online software program that will help you manage your small business. You can manage all aspects, from stock and jobs to sending invoices managing contracts.
Collect all Debts
Even when your jobs are being completed quickly, your small business may still run into the problem of having debts owed. When debts are taking a long time to be paid, this can also have a huge effect on cash flow.
Make sure that you’re keeping track of all debts owed to your business and make sure to include a Terms of Trade with a debt collection clause with all your invoices.
Once your job is complete, an invoice should be delivered promptly, and your client should be aware of how unpaid debts will be collected.