How to Squeeze More Profit and Cash Flow Out of Your Cleaning Business
Unless you are an MBA or CPA, the numbers game can get quite confusing. It is not just a matter of paying bills and balancing a checkbook. To know if your cleaning business is clearing a profit you have to look at accounts receivables, accounts payables, deductions, and depreciation, and then take a close look at your balance sheet. An MBA is not needed to understand the financial part of your cleaning business. However, it's a good idea to have a basic knowledge of accounting so you can decipher if your business is in the "red" or in the "black".
A business owner needs to keep in mind that profit is not the same as cash flow. Calculate your profit by subtracting expenses from net income. An example of profit is a cleaning job in which you charge your client $500 and your expenses are $200. The profit from the job is $300; however, until the client pays the bill you do not really have that $300.
Cash flow is another way to measure your cleaning company's financial health. What is cash flow? It is the cash receipts minus cash payments over a certain period of time. Paying attention and tracking the cash flow of your business is an important management task that you should not overlook. A positive cash flow means that you are bringing in more money than you are paying out, so your cash flow is often a more accurate financial picture of your business.
Another area businesses need to pay attention to is their profit margin. A profit margin is how much out of every dollar of a sale a company gets to keep. To calculate your profit margin you divide income by revenue or net profit by sales. For example, if you have $10,000 in sales and $1,000 in profit, your profit margin is 10 percent (1,000 divided by 10,000). Another way to look at this is if you charge $20 an hour for services and your expenses are $17 for labor, taxes and expenses, your profit margin is 15 percent.
Profit margins vary depending on the geographic area of the country and market conditions. With rising labor costs, profit margins are shrinking. To increase what your cleaning company is bringing home, you can work harder or smarter. Working harder means more clients and longer hours. But working smarter means finding ways to cut expenses and sell more services to your current customers.
Cutting expenses means taking a close look at your current expenditures. Are there tasks that you can outsource? Can temporary agencies provide employees for large and occasional jobs? Look to see if you have services such as internet and telephone, that you can get from one provider. Many service providers offer discounts to customers who buy their bundled services. It is also important to keep up-to-date on new products, equipment and procedures. New and more efficient machines, time-saving cleaning products and faster procedures can free up employees' time to work on other tasks.
Once your cleaning company is earning a profit, what do you do with that money? Growth will only occur if you reinvest in the business. This may mean new equipment or bonuses to employees. Another place to invest profits is a rainy day fund so your company is prepared for unexpected events. These events can be anything from a double-digit increase in insurance to a natural disaster to losing a major account. Without a rainy day fund, many small companies are not able to survive when the unexpected happens.
Financial reports might not be your strong point, but keeping an eye on your business' cash flow and paying attention to profit margins are essential for the success of your cleaning company. Once you understand the basic principles it's easier to keep a positive cash flow and increase your profit margins -- and that means your cleaning business will stay in black ink!
Related Tags: profit
Steve Hanson is co-founding member of The Janitorial Store (TM), an online community that offers weekly tips, articles, downloads, discussion forums, and more for anyone who would like to learn how to start a cleaning business. Visit The Janitorial Store's blog and get inspired by reading cleaning success stories from owners of cleaning companies. Your Article Search Directory : Find in Articles
Recent articles in this category:
- The No. 1 Rule For Projecting Confidence - Speak With Authority
One of the most important characteristics a person can project in a business setting - or any situat - After the Autumn Checkout European Debt Crisis and U.S. Brewing Rebound
In the commotion caused by the Fed on interest rates come to an end, the "disastrous" for the euro a - Advantages Of Arcade Game Rentals
There are many different advantages to arcade game rentals. Most people need something to release th - A General Primer on Truck Cargo Nets
In modern highways it is quite rare to see truck cargo nets in action, this is because they are usua - The United States Will Burst More Severe Financial Crisis
Not long ago, suddenly announced that the central bank to raise interest rates, the interest rate hi - Niche Marketing Profits - 3 Easy Steps to Finding a Profitable Niche Market Income in 10 Minutes
Like most beginners I was having a very difficult time trying to find a niche market to earn extra m - The Importance of Hospitality Management Consulting Firms Toronto
Businesses and the managers that help guide any business are in a constant state of improvement and - New Keynesian Theory Label
2010 winner of the Nobel Prize in Economics three theories have been labeled as "New Keynesian" labe - Federal Reserve Pouring Money QE2 Unpredictable Fortune
U.S. economist Milton Friedman proposed a "throw the cash from a helicopter" view, while the practic - Fiscal Consolidation Should no Longer Delay
British Chancellor of the Exchequer George Osborne today announced fiscal consolidation policy, shoc
Most viewed articles in this category:
- Common Financial Problems to Avoid
One must first change their habits and not procrastinate. American Consultants Inc at offers key fi - How a Bad Hire Can Hurt Your Business
What's worse - hiring the wrong person or not hiring anyone at all? Companies can become almost des - Joel Comm Is Dr. Adsense
What is Adsense? If you are new to making money online and net marketing, you may not know what Ads - 5 Steps For A Dynamic Wealth System Online
Recipe: Opportunity + knowledge + Dynamic Wealth System + Your Action = Massive Success!!! Step 1 - How To Stop Foreclosure
Losing your house to a foreclosure can be very scary. There are times when circumstances are ou - How to Always Pitch A Strike
As business owners, we are always working on new ways to convince people to become customers, client - Membrane Diffuser Solutions for Wastewater Treatment Systems
In the aeration basin of a typical wastewater treatment plant there are both organic and inorganic m - Another Year Hating Your Job or Loving Life?
Copyright © 2007 Mary Foley I've come to the conclusion that to be successful - really successf - Dyestuff Industry In India And China
World demand for dyes and organic pigments to touch $10.6 billion in 2008According to a study on dye - Cma-cgm Case : the Series of Lawsuits Continues in Syria, Lebanon, Egypt, France, England and the United States
Damietta company case : The series of lawsuits continues in Syria, Lebanon, Egypt, France, England a