When you are running your own business it is vital to be able to see where you have spent money on investments, where you have earned money and how much you can pay yourself in wages as a result. This means tracking every single cent that goes through your bank account and keeping a record.
If you are running a large business or you simply don’t have the time or expertise to monitor your finances properly, it would be a good idea to explore a bookkeeping service like EzyAccounts Bookkeeping services to get some help.
What are Outgoings?
Your outgoings are any payments you make on behalf of your business. If you are manufacturing products, this cost will be an outgoing. If you are offering a service, buying a new computer or upgrading your software would be an outgoing. Your wage, premises and bills are also monthly expenditures.
In order for your business to be successful, you need to make sure that your outgoings don’t exceed your income. This is essentially the same as your home finances, but it works slightly differently in business, especially if you have taken out a loan to start up. In this case, make sure that you are able to pay back the loan and you are gradually increasing your income to achieve profitability.
Your business income is the money you make when you sell a product or a service. If you want to make a profit, then you need to make sure that your income is higher than your expenditure. You also need to account for time, though, and consider how much you expect to be able to pay yourself per hour. This will give you a good indication of how to price your products.
What’s the Difference Between Gross Profit and Turnover?
Gross profit is the money you have made from your products minus the money it cost to produce them. It can also be referred to as your profit margin which is simply the difference between the cost and the sale price. If you are a running a service, it is your time that costs the money, so factor that in as well.
Turnover is the total amount of money that passes through your business and can be measured each month and each year. It includes all your expenditure as well as your profits. It is important that you are able to track your turnover as this will affect your business tax and GST.
Increase Your Profits
If you find that after doing all your calculations, you really should be earning more, then there are two ways to go about this:
First, see where you can cut back costs and improve your productivity. This might mean shopping around for a different supplier or it could mean rearranging your day to make sure that you waste less time.
Second, expand your business by hiring other workers. If you are working at capacity, it might be time to make that leap and become a boss. Hiring people is difficult if you’ve never done it before but with a solid team around you, you can reach new heights and make your business even more profitable.
Do you have any other money tips for business owners?