This is an example of a client we worked with over a number of years needing to review their profitability.
Being in the office cleaning sector, their business took a huge hit during Covid and recovering from that was a real challenge.
Some of the bookkeeping work was done in house but our role was to:
- Complete the complex elements of the bookkeeping process and finish he reconciliation each month
- Produce robust monthly financial information
- Cashflow forecasting
- Meet with them twice a month on their premises to review the accounts with them
There came a point in the business journey where we and the client were very concerned about the viability of the business going forward. They asked us to really hold them to account on their expenditure (in and out of the business) as they found conversations difficult as the Directors were family members. They asked us to help them look at how they could improve the profitability of their business.
So we met with the client twice a month to review the numbers and they moved forward with cutting costs e.g. moving premises, reducing travel costs, reviewing insurances etc.
We also then initiated the review of job profitability and they began to tackle those jobs that were not making the margins needed. It was clear that some jobs were not profitable and so, if fees could not be increased, we questioned whether these jobs were worth continuing.
We came up with a new job pricing structure which gave the desired profitability. This was a simply formulated spreadsheet they could use to help with pricing new jobs profitably.
I would like to say that this story has a happy ending and the client managed to trade themselves out of debt and are now trading successfully.
In reality, whilst all these measures helped enhance their profitability and stopped them from having to close, what actually happened is that the Directors took the decision to sell the business and move on.
The circumstances they found themselves in and the valuable work that we did with them had lead them to the point where they could clearly see the weaknesses in their business and that they would be better off walking away than continuing to battle in such a competitive market and overcoming the debt they had accrued to date.
The moral of this story is the importance of really knowing whether you are making a profit , not just overall as a business, but on each piece of work that you are carrying out for your customers. This is an absolute priority to understand as a business owner and those numbers should be being reviewed continually.
If as a business you need proactive support to help you review your financial data and what it means, please don’t hesitate to get in touch if we can help
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