If you’ve run your own business by yourself for any length of time, you know that you have to wear a lot of different hats to keep things moving forward. Daily responsibilities include things like accounting, marketing, social media management, customer support, etc. With all that and more going on, it’s easy for things to fall through the cracks. Sometimes money is left on the table when you don’t have all the systems and processes in place to keep up.
Let’s talk about some ways You, Inc. may be losing profits and how you can change that.
What are some things that cause you to lose out on revenue?
Hole in the system: Not properly tracking time taken to do the work
At first glance, you may think that only businesses who charge hourly rates need to track their time. But what if you charge a client $500 for work that takes 20 hours? That would come equate to an average of $25 per hour if you were to be paid at an hourly rate. Now, you may feel $25/hour is just fine for you, but what if you aiming to live on more than that? What if you have an assistant that you pay $10-$20/hr? After expenses, including self-employment taxes,, you are not making so much after all. Not having a system in place to keep track of the time you spend on each client can decrease your profitability because you are not being paid enough to meet your goals. There are a lot of great free or low-cost time tracking software on the market. For example, I’ve been using Toggl to track every minute of my day so I know how I’m spending my time and it’s been eye-opening to say the least. For client work, I use Freshbooks because it has a timer that I can use to create invoices automatically on a regular basis.
So how do you increase profitability?
- Charge more, or spend less time.
- Get better at estimating how long a project will take before you give a quote. This will come in time. But remember, time is a currency, and having well-defined systems in place helps you use that currency as efficiently as possible.
Hole in the system: Being asked to do additional work that is not on the contract
To a degree, free extra services that you do as favors for a client can help build your relationship and show great customer service. However, that can only go so far. Clients may call or ask for little extras here and there, and you may agree to do them…but if that’s happening on a regular basis, you need to evaluate whether or not they are just trying to take advantage of you. Perhaps the original contract (you do have one of those, don’t you?) needs to be reviewed and the fees adjusted. You should not be giving out billable services on a regular basis for free, so evaluate what extras you’re being asked to do, then include them in future package offerings.
So how do you increase profitability?
- Use a template, have it signed and refer to it often when clients ask for “favors”
- Clearly define the scope of the billable services being provided during the onboarding process
Hole in the system: Not keeping track of your unpaid invoices
Sometimes we get so busy in our business, we neglect the admin stuff. Invoices get behind, bookkeeping gets behind, etc. And when clients forget to pay or invoices get lost in the mail (if you’re still mailing them…stop it! 🙂 ), you may forget to collect. You can’t rely on your memory to remember outstanding invoices and neither should you.
So how do you increase profitability?
- If you have a good invoicing system like Freshbooks, tracking and collecting on delinquent invoices can be set up to run automatically.
- Freshbooks has a feature that allows you to resend the delinquent invoice if not paid after a day you specify (for example, after 30 days). You can also add late fees!
- The dashboard in systems like Quickbooks Online and Freshbooks can be set to show your outstanding invoices as soon as you log on.
As the CEO of You, Inc. you do need to have a firm grip on your money situation at any given moment. You also need to make sure you’re not undervaluing your services and that you’re reducing inefficiency with your time.
