If you have been wondering whether you have a profitable business, you are not alone. Whether you are starting a new business, taking over an existing business or trying to turn your struggling business around, profitability is the bread and butter of any venture. Without profit, just about no business is able to survive. Despite the obvious importance of breaking even and growing a profitable business, many business owners assume that they will be able to hold on a bit longer if they just try harder or bring in new clients or customers.
In reality, it often takes far more than a good month or few to ensure that you are able to start making a profit. Keep reading to find out how to tell whether your business will make a profit or not.
How to Tell if You Have a Profitable Business
How do you go about determining whether you have a profitable business, then? For starters, you could seek out an experienced accountant in Durban and surrounds who is able to help you gain accurate insight into whether or not your business is able to make a profit. Some of the services to look out for include the following:
Financial and project analyses.
A comprehensive financial analysis is, without a doubt, one of the most effective ways to determine what is working and what is not working. Without a full analysis, you are, for all effects, guesstimating your projected profits and losses. An analysis will give you a comprehensive overview of your finances, identifying potential areas for improvement, highlighting wasted resources, and showing you where you may be making a loss or making a profit. Likewise, project analysis can also be very useful if you are trying to evaluate new products or services for your business.
Cash flow forecasts.
Another useful service that can help to identify profitability in the short and long-term is a cash flow forecast. If you are trying to work out how best to manage your cash flow, a forecast will give you all the data you need to plan. A cash flow forecast gives you an estimate of the money that will flow in and out of your business. This forecast covers all projected income and expenses – often over the next 12 months but sometimes over a shorter time frame such as a month or even a week. While this does not always show you how much profit you can make, it can help you plan and prepare in a way that promotes a more stable and profitable business.
Financial audits and reviews.
Finally, another useful service is financial audits and reviews. As much as forecasting and analysing help you to plan, it can also be useful to look back to see what has historically worked and not worked. Audits can help you identify areas that took a loss over the financial year as well as areas that performed well. When you are able to get a historical snapshot of your finances, it soon becomes easier to spot challenges and opportunities. This helps you move forward in a way that ensures optimal success and profit.