This may seem a little ridiculous at first glance. I'm going to talk to bookkeepers about bookkeeping. You guys already know this stuff, right?!
But I'm going to talk bookkeeping to bookkeepers anyway. Because sometimes your bookkeeping businesses are not being shown the love that they deserve.
And in some cases, bookkeepers want confirmation that they're doing things right, because a lot of us just picked this stuff up as we went along.
So, let me ask you this - Is your business always getting the last child's hand-me-downs of your time and attention ?
This used to be me, prioritizing clients' work over my own business, until I realized that I had to treat my own business like it was my best client.
I had to lead by example, and I had to practice what I preached.
I had to ensure that my own business was going to be around for the long haul so that I could continue to help my clients to be around for the long haul.
Think about your absolute best client that you want to please and show all the love - what would your service to them look like? What information would you be giving them?
Do you look at your profit and loss (income statement) and balance sheet every month to tell you the story of your business? Do you have your P&L set up well for your business.
A key metric I look at is Gross Profit % (Gross Profit / Revenue). What percentage of your top-line revenue do you get to keep after you've deducted Costs of Sales.
In bookkeeping businesses, subcontractors and/or staff and oncharged subscriptions are 2 of the most common costs of sales. Essentially, it's any cost that directly relates to the income you're generating. It's usually a cost that you wouldn't have if you weren't generating the income.
When I had my bookkeeping business I could tell you how profitable each bookkeeper on my team was.
And then what % of your revenue is your net profit (before depreciation and taxation). In other words, what do you get to "take home."
I also track expenses (fixed costs and overheads - costs you have whether you make any money or not) as a % of revenue or you can also track it as a % of gross profit.
Lots of costs as a % of revenue are interesting - staff costs % and advertising and marketing % are 2 common examples.
I also track profit per service or by product so I can see what is most profitable and where I'm not making any money.
If you haven't read Profit First yet then I suggest you do. I don't follow it to a tee, I have my own similar system which I might share in a future email, but I really like the mindset concepts about flipping the accounting equation to put profit first instead of last.
Whoever it was that said, "revenue is vanity, profit is sanity and cash is king" was right.
PS: Get in touch if you want to prioritise your profit and create a bookkeeping business that you love.
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