For many business owners, the first number they look at is turnover. It’s an important measure, but it doesn’t tell the whole story. A business can have a healthy sales figure and still be leaving significant profit on the table.
With signs of greater resilience emerging in the UK economy, including stronger services activity and improving consumer confidence, it’s a good time for SMEs to look beyond simply generating sales and focus on how much of that revenue is actually contributing to the bottom line.
The good news is that improving profitability doesn’t necessarily mean working harder or finding hundreds of new customers. Often, relatively small changes to pricing, costs, processes and decision-making can make a surprisingly large difference.
1. Look Beyond Turnover
Turnover is an easy number to celebrate, but profit is what ultimately matters.
Do you know which of your products or services generate the highest margins? Are some customers considerably more profitable than others? Are there areas of the business that take up a lot of your time but contribute relatively little to your bottom line?
Regular management accounts can help you answer these questions and identify where your business is genuinely making money.
2. Review Your Pricing
When was the last time you properly reviewed your prices?
It’s easy to leave pricing unchanged because you don’t want to risk upsetting customers, but your prices should reflect the value you provide as well as the time and resources involved in delivering your product or service.
A carefully considered price increase can sometimes have a far greater impact on profitability than generating additional sales.
3. Find Your Most Profitable Opportunities
Not all growth is equal.
Instead of simply asking “How can we sell more?”, ask “What should we be selling more of?”
Your financial information can help identify your most profitable products, services, customer groups or sales channels. Focusing your marketing and business development efforts in these areas can create more profitable growth without necessarily increasing your workload.
4. Make Better Use of Technology
Technology and AI can provide some relatively quick wins for SMEs.
Automating invoicing, bookkeeping, reporting and routine administration can save valuable time, while AI tools can help with tasks such as marketing, customer communications and data analysis.
The key is not to introduce technology simply because it’s available. Look at where your business is spending the most time and ask whether technology could do some of that work more efficiently.
5. Start Using Your Numbers to Make Decisions
Perhaps the biggest opportunity is simply to become more engaged with your financial information.
Rather than waiting until your annual accounts are prepared, regular management information can show you what’s happening now. You can track margins, overheads, cash flow, sales performance and profitability and use that information to make decisions while there’s still time to act.
The Accountants247 team can help turn those numbers into useful information rather than simply presenting you with a set of accounts.
Small Changes Can Make a Big Difference
Improving profitability isn’t necessarily about making one dramatic change. It can come from a combination of better pricing, focusing on the right customers, improving efficiency and understanding exactly where your profits are being generated.
And with recent indicators suggesting that parts of the UK economy are showing renewed resilience, it could be a good time to look at your business with a growth mindset.
The question isn’t just “How much did we sell?” – it’s “How much did we make, where did we make it, and how can we do even better?”
Your accountant can help you answer those questions and turn your financial information into practical decisions that support stronger, more sustainable profitability. Speak to our friendly Accountants247 team today here.
