Client profitability

Business relationships are dynamic and changes can easily affect profitability without you realising. Three simple steps to keep on top of profitability are:

• Frequent reviews of the actual profit generated from a sample or all of your clients and comparison with what you expected to have achieved
• Renegotiate terms with clients where the target profitability is not being achieved
• Terminate unprofitable relationships

These steps assume that you have a management accounting system that will consistently measure client profitability and if you haven’t then you need to improve this area of your business as soon as you can.

Finally, take what you learn from this exercise and factor it in to your negotiations for new business.

Getting paid in good time

I’ll be blogging more about credit management in the next few weeks, but the simple fact of commercial life is that businesses go bust through a lack of cash – even if they are profitable.

So put credit management and control at the very heart of your business and make sure you get paid in good time.

Credit management is a wide topic but a starting point would be these three ideas:

• Ensure payment terms are agreed in writing before you start work
• Get sales and operational people, as well as your finance department, involved in credit control conversations with your clients
• Stop working with clients that haven’t paid you until they catch up

Business conditions remain challenging for all of us, but you can reduce some of the risks and make more time to concentrate on growth, if you can successfully improve client profitability and reduce the time it takes to get paid.

We regularly work with companies to help them in these two areas – resulting in more money in their bank accounts.

If you would like to discuss how we can help you, please give me a call on 020 7384 6800.

The tax calculation doesn’t change whether it’s done in June or January but it feels a lot worse when it’s done late because there’s no time to plan how to pay and if you need to negotiate time to pay with HMRC, the later you start the more you feel you’re on the back foot.

It doesn’t have to be this way!

Looking across the data provided to us by tax clients, there is very little data that isn’t knowable by May or June after the end of the tax year. The trick is to be organised about collecting it and passing it to your accountant.

In fact a really sensible target should be to have your tax return submitted by the beginning of July each year. This is because at the end of July you have to pay your second payment on account and if your tax bill is lower than your two payments on account then you need only pay the balance in July.

The simple message is – get yourself organised and get your tax return behind you as soon as you can after April each year.

Our last half-dozen will be submitted in time. It’s not them I’m worried about, it’s the guy who will call on January 31 and ask “Do you do tax returns?…….”

PS If you need help with your tax return (and it’s not the last week of January!) please give us a call on 020 7384 6800