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Pricing for profit: finding your real margin

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Most small firms can tell you their revenue to the pound and their profit only vaguely. That gap is a pricing problem. When you do not know your real margin per product, per client, or per job, you discount the work that makes money and protect the work that does not. Finding your real margin is unglamorous bookkeeping, but it is the highest-value analysis a small business can run. Start with gross margin per line, not blended profit A blended profit figure hides everything. Split revenue and direct costs by product line, service type, or client group, and the picture changes fast. It is common to find one line running at 60 percent gross margin subsidising another at 5 percent. You cannot price what you cannot see, so the first job is simply tagging income and direct costs properly in the ledger. Add the time nobody invoices Service businesses leak margin through unbilled time: the quick call, the revision round, the travel nobody logged. For one month, record all of it. Most fir...
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The purchase order habit: a small control with big payoff

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  Most small businesses approve spending with a nod in a meeting or a message that says "just get it". Then the invoice arrives, nobody remembers agreeing to it, and the bookkeeper spends an afternoon playing detective. The fix is one of the oldest controls in finance, and one of the least used by small firms: the purchase order. What a purchase order actually does A purchase order is a simple document raised before you buy: what you are buying, from whom, at what price, and who authorised it. When the invoice arrives, you match it against the order. If they agree, it gets paid. If they do not, you have a question to ask before money leaves the account. That three-way match (order, invoice, goods received) is the backbone of every serious purchase ledger, and it scales down to a five-person business perfectly well. Why small businesses skip it, and why they should not The usual objection is bureaucracy: "we are too small for POs". But the cost of not having them sho...
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Working capital for UK SMEs: five levers beyond the overdraft

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Working capital for UK SMEs: five levers beyond the overdraft   The overdraft is a habit, not a strategy When cash gets tight, most small businesses reach for the same tool: the overdraft. It is familiar, flexible and expensive, and banks can reduce or withdraw the facility exactly when trading gets difficult. Healthy businesses treat the overdraft as a backstop, not a funding plan, and pull five other levers first. Each one releases cash that is already inside the business, hiding in invoices, stock and payment terms. Lever 1: invoice finance Your biggest interest-free loan is the one you keep giving customers. Invoice finance turns issued invoices into cash within days rather than weeks. With factoring, the finance provider manages the sales ledger and collections; with invoice discounting, you keep control of customer relationships and the funding stays confidential. Costs vary with risk and volume, so compare the true all-in cost, including service charges, against the overd...
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Supplier Statement Reconciliations: The Monthly Check That Catches Duplicate Payments

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  Every month, your suppliers send statements showing what they think you owe them. Most small businesses glance at them, see nothing alarming, and file them away. That casual habit is costing UK businesses real money, because the supplier statement reconciliation is one of the simplest controls in accounts payable, and one of the most skipped. The purpose is straightforward: take each supplier's statement of outstanding invoices and credit notes, and tick every line back to your own purchase ledger. When the two agree, great. When they do not, the difference is almost always one of a handful of things, and every one of them is worth your attention. What the reconciliation actually catches The prize catch is the duplicate payment. It happens more easily than you think: an invoice arrives by email, gets entered, then a paper copy lands on someone's desk and gets entered again. Both copies get paid. When you reconcile against the supplier's statement, the second invoice si...
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Annual Investment Allowance: How UK Small Businesses Claim 100% Tax Relief on Equipment

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By John Thomas, Senior Accountant If your business is planning to buy machinery, computers, vans or office equipment, the Annual Investment Allowance could be the most valuable single line in your tax return. It lets you deduct the full cost of qualifying assets from your taxable profits in the year you buy them, instead of spreading the relief over several years. What the Annual Investment Allowance is The Annual Investment Allowance, usually shortened to AIA, is a capital allowances relief that gives 100% first-year tax relief on qualifying plant and machinery expenditure. Rather than writing the asset down at 18% or 6% a year through the main or special rate pools, you simply deduct the whole cost from your profits straight away. The allowance has been set at a permanent £1 million per year since 1 April 2023, so most small and medium-sized businesses can plan with confidence: virtually all of their qualifying equipment spend in a year will be covered. AIA is available to compa...
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Reading your balance sheet in 15 minutes: a small-company primer

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By John Thomas, Senior Accountant Ask a room of small-company directors when they last looked at their profit and loss account and most will give you a month. Ask about the balance sheet and you get blank stares. That is a shame, because the balance sheet is the one report that tells you what your business actually owns, what it owes, and what would be left if you walked away today. This primer shows you how to read it in 15 minutes. The three blocks: assets, liabilities, equity Every balance sheet balances on one simple formula: assets minus liabilities equals equity. If you understand what sits in each block, you understand the report. Assets are things the business owns or is owed. Fixed assets include equipment, vehicles, and fit-out costs. Current assets are the short-term ones: cash in the bank, stock, and the money customers owe you. Liabilities are what the business owes. Current liabilities fall due within a year: suppliers, VAT, corporation tax, and any overdraft....
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The month-end bookkeeping checklist every limited company should follow

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Ask most directors when they last looked at their books and the honest answer is "sometime around the year end". That is exactly when problems surface: missing receipts, a bank balance that does not match the ledger, and a VAT return built on guesswork. A short, repeatable month-end routine fixes all of that: an hour or two, done properly, keeps your records clean and gives you numbers you can actually trust. Why a monthly routine pays for itself When your books are only touched once a year, every error compounds. A duplicated invoice in April becomes a VAT mistake in the quarter to June and a cash-flow surprise in December. Monthly checks catch these things while they are still easy to fix. There is a second benefit that matters even more. Up-to-date books give you a live picture of profit and cash. You can see which customers are paying late, whether your margins are holding, and how much tax is quietly building up. Directors who review their numbers monthly make better ...
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