Using Your Accounting Software to Improve Sales
Every business is looking at how to improve their bottom line, whether is by reducing costs or increasing sales improvements can normally be made just by looking at what your current performance is.
One of the first places to look for information is in your accounting software. If your business uses an accounting software package to track your sales and expenses and banking that means that you have a wealth of information to work with to see how you can improve your bottom line.
This information will give you an accurate history of how you have been performing and from those previous trends you can get a better idea of where sales come from and what can be done to improve them. We will discuss some basic things that you can look at to see how you can start to improve your business.
Who are your top five customers in sales?
Most businesses will have a small number of customers that they deal with for most of their turnover. Do you know which customers they are? It could be the case that you will have customers that you will do a lot of work for but actually they may not get you much in the way of revenue. These customers may be a lot of work and at the end of the day not generate much profit. This means that they may not be as important as you think due to the amount of labour involved.
Who are your top five customers with regards to margin?
Businesses normally sell a range of products or services and they will have different price structures and costs, this means that some of your products will have a better margin. This mean that the gross profit you get from some sales will be a lot higher than others.
Looking at these two things could lead to insights that you may not have noticed about your business. Do you have customers that you spend a lot of time with but they do not purchase as much as other clients? This means that maybe you should spend some more time focussing on some of the other clients to see if you can improve their sales. If you have customers that buy a large amount without much encouragement from you could you increase the amount they buy by spending some extra time on them?
With looking at the margin of customers there may be some services that you offer that may give you a very low return. Are there other services or products that you could offer them that offer you a higher return? Are your prices a lot lower than other businesses and should they be increased to match what the market rate is?
These two aspects of who your top customers are and which ones have the best margin are very important tools for your business. They will offer insights into how your business is actually performing and who your most important customers actually are.
I am an MYOB software consultant helping businesses in Christchurch New Zealand get the most of their accounting software. With over four years experience in working with the software I can provide solutions on how to make the software fit your business and improve your productivity. Click here for MYOB Support in Christchurch
How to Set Prices for your Products
Many businesses make their money by selling items that they produce or buy from a wholesaler onto customers for a higher price. They advantage for the customers is a range and choice of options that the customer could not find themselves.
One of the key things that the business has to do is price the items correctly to ensure that they make a profit on them, there are many methods that are used to price goods and we will discuss some of the advantages of each one.
The first thing is that a business will normally need to do is sell the item for more than what they paid for it. The money remaining from the sale after subtracting what you paid the supplier is called the “gross profit”. This gross profit is then used to pay all your other expenses and then anything that is left after that is your “net profit”. Having a large enough gross profit is important otherwise your business will not be profitable overall. This means calculating it correctly if very important.
The first thing required to calculate a sell price is to figure out the cost of the product that you are selling. If you are a reseller this is quite simple as it is the price you pay for it plus any shipping costs to get it to your store/warehouse. If you are a manufacturer of an item this is the cost directly associated with building that one item.
The following pricing methods are
Mark-up – This is taking the original cost of the item and adding a certain amount to it. This could be a percentage for example a 100 percent mark-up is to double the price. Or else you could add a mark-up of a fixed dollar amount saying that you mark-up items by only 10 dollars. Normally a percentage is used since if you start buying items at a higher price and still only mark up by a fixed dollar amount you will start to notice increased sales but your gross profit may stay the same due to the same number of sales.
Margin – This works very similarly but it is the amount remaining from the sale price. If something cost ten dollars but you sell it for twenty your margin is ten dollars or 50% of the twenty dollars. The margin percentage is quite often used since people can quickly figure out what their gross profit is from their sales total.
Things to consider when adjusting your prices.
Will people by more or less of you product if the price changes? Some products demand may change based on price such as food items, some change less such as car repairs. Will changing the price still make them shop with you but shop less compared to them going somewhere else.
How do you compare to everyone else? You do not have to be the cheapest seller to get customers, you can retain customers based on service and the quality of your product compared to competitors. If you are the cheapest seller and raising your prices mean you are still the cheapest seller that means it may be time to raise prices.
When changing prices for products remember that not everything has to be done at once. You can take a small section of your products and change the prices for them. You can see what the response is from your customers to these changes. They may not notice or if they do they do not care about the change. They may offer feedback on what they would rather pay for and if there is anything extra you can offer. It is about paying attention to what happens when you make changes and then responding to that feedback.
I hope this gives you some ideas about how to look at pricing your goods for sale, and gives you some options to try when looking at your prices when selling to your customers.
I am an MYOB software consultant helping businesses in Christchurch New Zealand get the most of their accounting software. With over four years experience in working with the software I can provide solutions on how to make the software fit your business and improve your productivity. Click here for MYOB Support in Christchurch