Here's a simple fix to make your business more profitable right now.

If your business isn’t as profitable as it should be it usually comes down to one of 5 really common money leaks.

It's not easy to identify them all the time.

Here's the way to do it...

As a business owner with an accounting background, I'm constantly trying to find money leaks, and it's not always a straightforward task. But this surprisingly simple solution can help you see exactly where you're losing money, and it has completely transformed our profitability.

How to get more control over your profits

Making a profit on a business project is a constant balancing act. If you don’t get certain things right, there’s a huge potential to lose money. 

Some of the things you need to consider are that:

·       You have the right mix of people

·       Your team doesn’t over (or under) deliver

·       You’ve priced the job well

That means your people costs play a huge part in how profitable your business is.

So what do you really do all day?

When I asked my team to start tracking their time (and started to track my own time too), what we discovered gave us so much more control over our profitability.  Time tracking isn’t about spying or trying to catch people out. The simple fact is, if you don’t know exactly how your team is spending their time, you’ll always be stuck on the treadmill of busy work. 

Here are 5 of the most common and costly leaks that time tracking has uncovered for us:

1. Scope creep

If a client is regularly adding in extra services or your labour costs have increased and you’re not adjusting your price to accommodate this, you’ve got scope creep, and it’s costing you money. Simply identifying where it’s happening, and putting a system in place to manage it, will not only improve your bottom line but ensure that you don’t go over the budget.

2. Under-estimating how much a job or selling a product will cost to deliver

It’s easy to underestimate the true cost of selling a product or running a job, particularly if you don’t have any data to base it on. When you underprice yourself regularly, your profit margins will be lower than you expect, and you’re going to start running out of cash. Once again, tracking your team and your time, because when you understand what a job or product involves and who is doing the work, you’ll finally know the true cost and can charge for it.

3. Inefficient processes

When you start to track your team’s time you start to see which parts of a job or process are most time-consuming. Then you can then work out how to make the process more efficient. Often it can be as simple as moving from manual systems to automated ones and with the wealth of tech available it can be very simple to implement.

4. Too much time 

There are only so many hours in the day, and no matter how efficient your business is you’ll want to make sure that you’re using those hours wisely. This means working on those activities which are the most profitable for your business. Setting a realistic target of how many hours your team is expected to be doing on the job, helps them to manage their workload in a more time-efficient and profitable way.

5. One job or product is less profitably than another

If one of your products or jobs is more profitably than the other, digging deeper to understand why can help you improve efficiencies in the other jobs. Time tracking is a great way to work out a best practice that can raise the bar across your whole business. It will also highlights if there is spare capacity or not enough, so you can plan ahead and redistribute your team accordingly.

Plugging the leaks in your business is just one of the many tools we use to help grow more successful.