Improving the profitability of a company

Regularly monitor your company’s profitability with basic financial calculations:

• Make regular cash flow calculations, for example once a week. This will keep you informed of the amount of money entering your company and the amount of money going out.
• Monitor your company’s budget implementation throughout the entire budget period. If there are clear differences between the budget and the actual costs, find out why and take immediate action.
• Track product and customer profitability to discover low-performing products and customers. Dare to give them up and focus on the most profitable products and customers. 
• Check regularly that the pricing of your company’s products is on a profitable foundation. Change product prices if necessary.
• Monitor the productivity of work, i.e. keep a record of time spent on work. This will help you find out the tasks, customers and working methods that do not generate enough money in relation to the working hours used. 

Also ensure that deductible expenses are always kept up to date in the accounts. This means that the income statement, balance sheet and cash flow statement provide a good overall picture of your company’s assets and liquidity.

Close cooperation with the accountant helps you monitor your company’s profitability and financial situation. You will also be able to cope better when you do not have to worry if things are in order.

More information on ensuring profitability

Make sure that your company has funds for at least three months’ payments. This allows your company to manage unexpected expenses and seasonal fluctuations in revenue. 

To help your cash management, you can, for example, draw up a cash budget and make cash flow calculations.

If it is difficult to find money to pay invoices, you can reduce your company’s expenditure, for example by

• finding cheaper options for compulsory costs
• streamlining work phases by eliminating any unnecessary steps
• removing unprofitable goods and services from the selection
• tendering suppliers
• concentrating your purchases for bulk discounts
• outsourcing activities that are not part of your core business
• reducing the costs of your private life if your company does not produce enough profit.

Also check that your company’s prepayment taxOpens in a new window. is not too high, and that all deductible costs and expense allowances have been taken into account in the taxation of your company.

Never neglect the payment of statutory fees or salaries. 

You can earn more income by e.g.

• improving marketing
• increasing sales to your profitable customers
• finding new customers and markets
• increasing the prices of your products
• arranging discount sales for products that otherwise remain in stock
• expanding the product range.

A limited liability company can also collect capital for the company by a share of issues.