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7 Effective Ways To Increase Your Profit Margins

May 23, 2008

Allowing accounts to get behind in the payment of their bills can create real cash flow problems. Without a constant stream of cash flowing into your business, you can't pay your expenses and salaries, and can't provide the selection of products or level of service your customers want and expect. This is one of the most critical areas in business, yet it's also one of the most overlooked and easiest to let get out of control.

Quick Tips and Action Points:

1) If possible, consider requiring (or at least asking for) payment at the time a product is purchased or a service is rendered.

2) Reduce the time between shipping a product or rendering a service and when you send the invoice or bill.

3) Include a bill with the product, and offer discounts for payment within a certain time period.

4) To bring errant accounts current, offer discounts for immediate payment, or payment by a certain date.


What you haphazardly pay out, without a plan or accountability, can hurt you as much, or more than, what you allow others to cheat you out of by not paying their bills. Every expense you make for your business should be planned, have a definite purpose, and be accounted for. It's not okay to even once in a while spend something expectedly - even on a seemingly small item. You're in business. And the purpose of your business is to make a profit. It's the little leaks that sink big ships. This is an area that you have to be completely hard-nosed about and not let slip in the least.

Quick Tips and Action Points:

1) Check your bills. Don't pay more than once for the same invoice.

2) Check all invoices to make sure they're actual expenses. Oftentimes, companies will send what appears to be an invoice with an amount for you to pay. Your bookkeeper may simply go ahead and pay it without realizing that it was only a solicitation for a subscription or product that looked deceptively like an invoice.

3) Keep close track on any charges you make with a debit card, and deduct them from your account as soon as you can so you can keep accurate records of your finances and cash flow.

4) Make sure all charges on the invoice are accurate as agreed upon at the time of purchase. If you've negotiated shipping or installation charges to be paid by the vendor or supplier, make sure they don't appear on your invoice.


Perhaps the largest expense in most businesses is that of paying the help. Employee's costs and expenses can add up to tremendous sums, especially if not monitored and controlled. It's so easy to get soft-hearted and want to give your employees raises, bonuses and other monetary awards. This is not to say that you shouldn't do those things, but you also need to recognize that being soft-hearted is not the way to run a successful business - especially when your business may not be doing as well as it could (or should) be doing.

Quick Tips and Action Points:

1) Weigh the costs of doing certain types of work in-house with your own employees, versus subbing the work out to outside vendors or services that can perform the same work. In some cases you may have to pay a little more, but what you'll save in employee benefits may more than offset the costs. And you won't have to deal with vacations, sick leave and employee disagreements or hassles.

2) Temporary services can be used effectively for short term projects. Again, you may pay a little more, but when the job is done, or if you need to cut back on expenses, it's easier to stop using the temporary service than it is to fire, lay-off or let an employee go.

3) Medical and dental insurance plans are nice to offer employees, but their costs can add up very quickly. If your employees require (or would like to participate in) an insurance plan, have them pay for a portion of the premium, and you pay the difference.

4) Part time employees are usually not subject to the same benefits as their full time counterparts. Insurance benefits and other employee benefits, may not be necessary if the employee works fewer than full time hours.

5) Also get competitive bids for your insurance and other employee benefits from outside sources every few years to make sure you're getting value for money.


People who buy based on quality will buy sell higher priced products with better profit margins much easier than those that's don't. This means buying only lists which are guaranteed to deliver high-income people, or advertising in publications that the higher earners are reading.

Find the market first, and then deliver a high margin product to them. Low quality customers take a lot of time to serve, they buy less, but also take as much time to sell as wealthy people, if not more time.

Quick Tips and Action Points:

1) It's not impossible to make high margin sales to lower quality customers, but there is simply less margin for error.

2) When you sell higher you may sell less, but you'll also spend less on labour, marketing, etc., and come out better in the end.

3) Go over your client list. You're sure to find some "dead weight." Stop wasting your time on them. If they beg to come back and buy, name your price.


A Web page is a tool that can be used to increase your profit margins, as the costs associated with web marketing can be much lower for you. Get yourself a good web marketing plan.


A poorly tuned car wastes a lot of petrol. An inefficient business is certainly losing money it could easily hold onto. Do a top to bottom examination of how efficiently you're running. You can hire an efficiency consultant, or educate yourself by reading up on ways to engineer efficiency in business organizations.

Quick Tips and Action Points:

1) Get employee input on how everyone can work smarter, not harder.

2) Leave no stone unturned. Look at all areas of your business.


When you set a budget, it's like setting a goal. You know how much you are going to spend each month, and then you make sure you don't go beyond it. If you have no monetary figure that tells you to stop spending and when, you most often won't. This is tricky because you have to spend money to make money. A budget that is not well planned can cripple your ability to market. But that's all part of the game. If you have to, take a budget management course or attend a seminar on the latest techniques.

Quick Tips and Action Points:

1) Make employees get purchase orders and approval from you before they buy anything.

2) Don't be pound wise and penny foolish.

3) It's tempting to cut ads and other marketing expenses, but be very careful - this is what brings in customers and sales. But you may be able to drop ads if you strive for and get free publicity.
About the Author
Power Marketing System is an audio and web based marketing program designed to help small to medium enterprises increase their profits and outsell their competition. Explode your business today. Get the FREE audio now. Visit: http://www.powermarketingsystem.co.uk
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