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Filtering by Category: financial management

What happens to your profit when you change your sales price?

Find out how a small change in your selling price can have a dramatic impact on your gross profit and sales transactions.

Try our new online decision making tool - Impact of Price Change on Profit.

Its easy to use - you only need to enter 3 figures get started.

 

If you want to increase your price but are concerned that some customers will be resistant to the price rise – view how many sales transactions you can deduct to maintain the original gross profit using the software tool.

 

If you want to reduce your price and are concerned about the effect on your profit view how many additional sales transactions are required to maintain the original gross profit using the software tool.

Open Impact of Price Change on Profit Tool


Having worked in accountancy practices for a number of years we know it's what happens today and in the future that's important (not just the historical annual financial accounts).  Find out how. we can help your business. 

How Do I Calculate My Gross Profit?

Gross Profit Calculation

"How do I calculate my gross profit"
is a question we have been asked by many clients over the years and...... it isn't always the new business owners that ask.

Gross profit measures your profitability before expenses/overheads and relates directly to your sales/turnover

As an example:

Sales/Turnover or Takings     £1,000

Less Direct Cost of Sales:
eg purchases, materials etc      £700          

Gross Profit                              £300  (Gross Profit = Sales less Direct Costs)
Gross Margin %                           30% (Gross Profit % = Gross Profit divided by Turnover)

Gross margin % measures profitability  
Higher values indicate a higher return on sales.  This is the difference between the price of your product and what it cost you to buy or make it. Therefore the only way to increase your gross margin is to sell at a higher price or buy at a lower price.

Don't forget about your overheads/expenses
Remember the Gross Profit is calculated before general expenses/overheads are deducted so you must allow for rent, rates, wages etc.


Simple Profit and Loss Statement Example

Sales/Turnover or Takings      £100,000

Less Direct Cost of Sales
eg purchases, materials etc      £70,000         

Gross Profit                              £30,000  

Overheads/Expenses:

  • Rent                                     5,000
  • Rates                                     1,500 
  • Wages                                10,000
  • Insurances                            1,000
  • Advertising etc                         500

Total Expenses                             £18,000 

Net Profit                                    £12,000


Looking After Your Business Finances

Find out more about our book-keeping and management account services.

To find out how we can help you and your business contact Gillian on 0844 736 5611 or email gillian@brightchilli.com


The content of this article is provided for information only. While all reasonable care has been taken to ensure that the information in this article is accurate, no liability is accepted by Bright Chilli Limited for any loss or damage caused to any person or business relying on any statement or omission in the content of this article.

Pro-active advice not just number crunching

 

Pro-active advice not just number crunching for your book-keeping from the Bright Chilli team.

Having worked in accountancy practices for a number of years we know it's what happens today and in the future that's important (not just the historical annual financial accounts).

Take advantage of our many years experience book-keeping and book-keeping training working with a diverse range of business types throughout Scotland.

 

Outsourcing your book-keeping will free up your time to allow you to concentrate on what's important for your business and let us take care of your numbers.

Find out more about our book-keeping, VAT Returns and Management Account services - click here

 

 

 

 

 

National Minimum Wage - October 2013

Did you know that the national minimum wage rate changed in October 2013?
Employees aged 21 and over are to be paid £6.31 per hour. 

Processing your wages

Have you checked all employees are paid the correct rate of pay as you process your payroll run this month?

Different rates apply according to age and whether or not you are in a training scheme/apprentice.

For all rates and further details check out the Gov.uk website -
https://www.gov.uk/national-minimum-wage-rates

Are You Looking After Your Business Cashflow?

Cashflow Management

Managing cash flow is critical for survival and success in business. Without cash, profits are almost meaningless. 

 We prefer weekly cashflow forecasts for managing bank accounts with tight financial constraints.

Planning ahead for large expenses or a reduction in sales can identify when there could be a crisis and you can take action.

Creating a cashflow

  • Cashflow tracks the movement of any funds in and out over a set period
  • Select a reporting period that suits, whether it is weekly, monthly or quarterly 
  • You should be realistic when preparing your cash flow forecast
  • Be as detailed as you want when forecasting your income and expenditure ie sales, purchases and wages etc. 
  • Remember that it is easier to forecast in the short term as opposed to years ahead. 

 cashflow forecasting

Creating a cashflow for your business keeps you accustomed to your current bank balance levels and what cash is available.

Cashflows keep you informed on the level of expenditure in your business.

Free cashflow template

There are many forms of cashflow software available but can be overcomplicated for running a small business.

Email hello@brightchilli.com for a free copy of our excel cashflow template to get started tracking your cash movements.

 


The content of this article is provided for information only. While all reasonable care has been taken to ensure that the information in this article is accurate, no liability is accepted by Bright Chilli Limited for any loss or damage caused to any person or business relying on any statement or omission in the content of this article.