Jasmine Birtles
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Stay Ahead of the Competition: Regular Audits Can Boost Your Margins
Reading Time: 3 minutesIf you want to know how to boost your business profit margins, you are at the right place.
Increasing sales and business strategies to achieve this goal is one way of staying ahead of your competition.
To unlock business savings by doing an energy audit, you can compare the amount of money your business is spending on energy with the amount of energy your business uses to find a cheaper deal that will allow you to save.
- What is A Pricing Audit?
- How to do a Price Audit
- What is the Profit Margin?
- Ways to Boost Your Business Profit Margins
What is A Pricing Audit?
This is the process used to evaluate your company’s pricing strategy. This will help you understand what customers will pay for your products. It will also help you understand the market in which your product finds itself.
The process can be used to analyse the following:
Marketing Position
Promotions
Customer Value
Cost to serve
Sales Processes
By doing a regular price audit, you can avoid any financial problems your business might have, such as not having stock correctly priced or having too many discounted prices.
There are two types of audits that can be done.
Internal Control
This internal audit focuses on bookkeeping, the company’s management as well as other functions.
External Review
This review is done by a third party to check the business inventory and ensure no fraud within the company.
How to do a Price Audit
To do a price audit, you need to do the following. These are the three basic stages of preparing your business for a price audit.
Define your business goals and strategies.
Your business objective needs to align with your business’s pricing strategies. Your goal should be to work towards increasing your profit margin by adjusting your business strategies regularly.
Review data to understand current strategies.
Reviewing your current strategies and analysing the data to see which pricing strategies are working and which do not impact your business.
Identify the areas of improvement.
Once you have reviewed your data and found the strategies that do not work, you can find ways to improve the strategy.
What is the Profit Margin?
This is the difference between your business sales and expenses. Your business is deemed successful if you have a higher profit margin, meaning there is more income than expenses.
There are three types of profit margins.
Gross profit margin
This refers to the business’s total revenue and the cost of the sold goods divided by revenue multiplied by 100%, as this answer is a percentage.
Operating profit margin
This refers to all the other operating expenses, such as salaries, rent, utilities, and the cost of goods sold divided by total revenue multiplied by 100%.
Net profit margin
This refers to all expenses (operating, cost of sold goods, and even taxes and interest payments to be deducted from the total revenue to get the business’s net profit margin.
Ways to Boost Your Business Profit Margins
Here are ways that you can use to boost your business profit margins.
Do an Inventory Analysis
Constantly checking the amount of stock you have on hand and ensuring that nothing is left over or unsold before ordering more stock can help save on business expenses.
Depending on the type of product you are selling, order products with a longer shelf life so that you do not have to throw out expired goods before you can get them sold.
Compare Your Product
Compare your product with your competitor’s product and prices.
Use a Price Cut
To attract more customers to your business. You can use the price-cut method to get more sales than your competitors and still sell high-quality products. This will bring more customers to your business even after you have adjusted the price.
Reduce the Cost of Production
Finding ways to reduce the cost of production is another way to increase profit margins.
Look for Growth Opportunities for Your Business.
Finding new markets in which your business can sell its products or services can help create more revenue for the business.
Create a Customer Loyalty Program
This will reward both your business and your customers as they will keep buying your products to get the rewards, and you can save on getting products sold and increase business margins.
Conclusion
Constantly checking your business books is how you stay ahead of your competition and boosts your profit margins.
Ensuring that there is more income than expenses will save your business more money.
The ways listed above can help you boost your business profit margins without it costing extra money to the business. Be sure to implement the methods that will benefit both your consumers but won’t add extra costs to your business.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.
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