Determining important financial information is part and parcel of growing your business. That’s why business consultants are there to guide startups and business owners who want to learn about profit margins.
So if you’ve ever wondered about how to calculate your business’s profit, this post could be of some help. Hopefully, it can serve as a guide to attracting more investors to your business.
Determine your business’s net income
Business profit can be measured in three ways: gross profit, net profit, and operating profit. Net profit basically tells you how much money you’ve made and can take home as your earnings.
The net profit margin can be the gauge of your business’s profitability. It’s considered your company’s regular profit margin and covers any income that’s the result of your business investments.
Your net profit is also a reliable indicator of your business’s overall performance. This is why a lot of business accounts call it your company’s “bottom line.”
Divide your net income by your revenue
To get your profit margin percentage, multiply your total by 100. Keep this formula in mind: net profit margin = net income/revenue multiplied by 100.
That’s how you can calculate the net profit margin of your business. It can also help you see if there are any red flags as far as your financials are concerned.
Of course, you can always use your trusted bookkeeping system that keeps track of your gross profit after operating costs, costs of goods sold (COGS), taxes, interests, and other expenses. Don’t forget to include your office rent and business insurance costs along with other fixed expenses.
There are also some great accounting software you might want to look at to make computation easier and more efficient.
Find ways to improve your profit margin
After getting a good idea of your business’s net profit margin, you can now plan how to improve it (or sustain what you’ve been doing right). You can do this on your own or with the help of a skilled financial advisor.
For instance, if it’s a bit on the low side, you can look into improving sales or workplace efficiency. Take a look at your payroll services and see if any discrepancies are worth investigating.
If certain corporate clients or partners owe you, you can get some commercial debt collectors to recover the amount on your behalf. Look into those with a high success rate while maintaining professionalism in every aspect of the collection process.
Maybe it’s time to look into new trading apps and consider hiring tax consultants to make better sense of the numbers and figures. Tax planning isn’t a simple thing to do, so any help from experts should be welcome at this point.
And if you want to look at beginner-friendly trading platforms, consider our quick guide on Tiger Brokers and how to use it. It can help you get an idea of how to trade in stock markets not just in Singapore but also in Canada, Australia, and Hong Kong.