On this page
- Get your pricing strategy right
- Review your cash-handling controls
- Review forward orders
With Christmas approaching, November is the perfect time to start thinking about improvements for next year - before you get too busy. Try these three ideas to get your profits soaring.
Get your pricing strategy right
Pricing of your product or service drives your profitability. Get it right and review regularly.
How to do it
- review all the costs associated with making or selling the product or service and calculate the cost per item
- look at what competitors are charging to ensure that you remain competitive
- know what your customers are prepared to pay – you may increase profit margin over costs if you are offering a high demand product or service
- understand your breakeven point, margins and markups so that the selling price of all new items will cover costs and make profit.
When reviewing your pricing strategy:
- calculate your hourly rate to include non-chargeable hours if you provide a service
- do some market research to understand better what your customers are prepared to pay
- if you're registered for GST you need to ensure you include the GST amount to your total selling price
- keep an eye on your profitability - if you don't believe you can increase your sales price then the next step is to look carefully at your costs
- remember discounting your sales is selling at a reduced price so make sure you understand the impact of discounting before you use this technique.
Review your cash-handling controls
Control cash within your business to reduce the temptation to steal - for employees or visitors.
How to do it
- look at all elements of your business where cash is involved and note each one
- for each cash element noted, review the controls, procedures to safeguard this cash
- make a list of the areas where cash handling procedures can be improved.
When implementing cash controls:
- have a petty cash policy in your business (make sure it includes having two people present when counting cash to protect your employees). Use our petty cash policy in our Financial policies and procedures template
- keep cash receipts separate from cash payments - this will make record keeping more accurate and reduce the temptation to inappropriately spend business takings
- never leave cash on the business premises for an extended period. Have a policy of banking regularly; daily banking is the best option.
Review forward orders
Understand what orders you have in your business so you can ensure you have adequate stock and resources to deliver customer orders on time. This will improve cash flow and customer relationships.
How to do it
- review all current and future (even potential) orders for at least the next six months
- review stock holdings and check stock availability from suppliers
- check your cash flow forecast to ensure that you will have adequate funds to purchase stock
- review staffing levels to ensure that you will have adequate staff to meet orders and delivery timeframes
During reviews of forward orders:
- if you don't already have one, implement a purchasing policy to help monitor stock purchases and related cash flow issues
- negotiate with suppliers if you are anticipating a large number of orders to help with your cash flow
- request a deposit or progress payments from your customer where a forward order requires large outlays of cash
- regularly review staff productivity and overtime to ensure your staffing will meet your forward order requirements
- don't forget to check annual leave applications against forward orders to ensure you have enough staff to complete orders.
Want a financial reminder in December?
Sign up for the Small Business Victoria update to receive fortnightly tips, trends and tasks. It will include our handy financial improvement tasks for December.