What is Profit Before Tax?
Every business owner wants to make as much money as they can, but how? If you know the costs of running your business, you will be able to get the best out of your own money. Business owners who are running on a tight budget often face a struggle getting everything they want from their business, but here are some tips to help you make as much profit as possible.
While keeping your business running costs will be the main priority, cutting down on office costs can help you to save a lot of money. Your office may look pretty, but if it’s the place where you spend the majority of your time, it can be holding you back from what your business is really capable of. If you can keep a better control on your office expenses, you will see a large chunk of your earnings.
Profit Before Tax: Key Benefits
Of course, it’s not all doom and gloom. There are many opportunities, too. Here are the main benefits of operating a profitable business.
The company enjoys lower taxation. The main advantage to this is that if it brings in more money than it pays in tax, the company gets to keep all of the difference.
It can pay less dividends to shareholders. This helps increase the share price. Shareholders are often the reason for running a company. With them at the helm, they must have some amount of motivation. The more they believe in the company, the more they will likely to want to buy their own shares, thus increasing the price of the company.
It pays less business rates. These are bills that have to be paid to local government.
Profit Before Tax: Common Pitfalls and How to Avoid Them
When working with clients, you can be a good salesperson, but only if you are doing the same for yourself. Every company has its own set of key performance indicators (KPIs) to keep track of key financials and productivity metrics. Having the right scorecards in place will help you create realistic goals and budget more efficiently.
Implementing an in-house (or outsourced) financial reporting tool that can be viewed and downloaded as a PDF to track key metrics is key. An open book model is essential because it will allow your staff to have a better understanding of the money flowing in and going out, versus only relying on the standard monthly business statement.
Profit before tax in action
When you’re running a small business you know you have to be creative. Some times it’s a case of tweaking existing processes and trying out new ones and other times it’s a case of making sweeping changes. Either way, it’s all about finding ways to cut costs and increase profitability.
In order to grow your business, you’ll have to do things differently and focus on what works best. For example, if you already do online marketing for your business, it may not be wise to implement an expensive PR campaign and spend loads of cash on Facebook advertising. Marketing is simply one of the fastest ways to increase sales but be conscious of your budget and remember that new customers are worth more.