Reduce Expenses & Increase Income with Informational BookkeepingFeb 07, 2022
Following on from last week's blog post about deciding what information YOU want out of your informational bookkeeping, we will be looking at how to obtain this information and what to do with it. If you missed it, you can get your FREE brainstorming your numbers worksheet here
So I'm going to start with the areas we want to save money. We need to start with knowing how much we CURRENTLY spend and decide how we are going to reduce this amount.
The key to informational bookkeeping is SPECIFICITY. Having one account in your chart of accounts called 'job purchases' isn't going to cut it. Be as specific as you can with your chart of accounts and allocate each expense to it's appropriate account.
You can get SO MUCH INFORMATION just by doing this simple change in your trade business bookkeeping.
So if you do use a bookkeeper you need to advise them of the accounts you want expenses allocated to because whilst the tax department don't really mind, as long as they know the tax paid on the purchases, YOU are now going to need to know this information. By knowing how much you spend on areas like office supplies, fuel, and other regular expenses you have a starting benchmark to work from and gauge your success.
You might be horrified to find out how much you have spent on paper for example by buying it when you need it, but now you know how much you use over a period of time you can take advantage of bulk discounts for a product that doesn't go out of date and you will definitely use up.
This can also be used for products like circuit breakers and cable or thinners and sandpaper. If you know what you're spending overall for a product and also with a supplier specifically it can give you huge leverage for requesting discounts and thus increasing your profits.
On the flip side is your income. Separating out your income into accounts when you do your invoicing is one of the quickest ways to see what your main revenue generating activities at any point in time instead of having to sift back through job sheets (even electronic ones).
It is so important to know what your main revenue is. For a long time I didn't have our preventative servicing separated out from our faults & part replacements. Once I did I realised it was actually a more profitable part of our business than I'd given it credit for (I had largely just thought of it as a marketing exercise that covered costs, as a service we provided after installation to increase trust for the customer when selling the installation). Now I view this part of the business with as much importance as the installations and strive to increase our customer base in this area as well.
If you are doing jobs that don't make up a huge part of your business and you have no intention of ever niche-ing in this area then you can use this information to make the decision to give that job type away. It's ok to say to customers that you don't do that type of work anymore but recommend them to someone who does. You don't need to do everything for everyone. Customer's appreciate that you are honest that it's not your area of expertise and mostly come back to you for the job types you are an expert in. You will also reduce the holding stock and tools required for this type of work which will increase your overall profit as well.
If you are wanting to implement these ideas and need some guidance and extra advice check out my Decrease Wasted Time online course or Hop on the Waitlist to be notified when future courses are released this year.
In next week's blog we're going to cover the profit calculation and ways to increase it so if you want to be reminded of it, sign up to the waitlist above and you will automatically be emailed a reminder!
Have a great week
Stay in the Loop
Keep up with the latest Blog Posts, News & Courses!
We hate SPAM. We will never sell your information, for any reason.