Increased hours in the office do not necessarily equate to an increase in profitability. Do you find yourself having to work longer hours because your revenue has stagnated, yet you still consistently face cash flow problems? We have seen many businesses face the same issues, irrespective of the industry in which they operate. Here are a few ideas to help get you started on ways to improve the profitability of your business.
Work in progress (WIP)
Work in progress is work completed by yourself, or your team, that for whatever reason has not yet been billed to the client. By examining your WIP in detail you will be able to see what time is not recoverable, and therefore needs to be written off, as well as what time is recoverable and ready to be billed.
By having a clean WIP, you will have a clearer picture of what jobs are in progress at any point in time. This will allow you to focus on closing jobs which can then be billed immediately, as well as providing your clients with a faster job turnaround. It will also help to improve your cash flow as revenue can be received sooner, rather than say three months after the job was completed.
Do you find yourself drowning in a sea of paperwork that you are constantly shuffling when looking for something? You can probably remember that is has come across your desk, just not what pile it has ended up in! This method of “filing” will also contribute to inefficiencies in your office because time is wasted frequently hunting for documents that are necessary to complete a job.
One way to free up some time is to consider moving to a predominately paperless office. By investing in software to suit your needs, documents can be accessible to all staff all of the time. This means that you and your staff are more productive to work on closing jobs in your WIP so that you can then bill the client sooner rather than later.
Implement a receivables system
You can implement a receivables system, including emails, phone scripts, letters and follow-ups for all clients. If you combine this system with cleaning up your WIP you can reduce lock up, which is essentially cash tied up in WIP and receivables, to increase your cash flow.
By starting with these few ideas, you will go a long way to making your cash flow problems a thing of the past. The extra time you have gained can be put into adding value to your existing clients or obtaining new clients for your business. The increase in goods and services you can provide to your clients, will assist in increasing your revenue and ultimately your profitability.
If you would like more information on ways to improve the profitability in your business, then please contact us.