Latest Accounting News
Hot Issues
Business confidence hits 5-month high: NAB
Caution advised on best interests duty with cryptocurrencies
$20,000 asset write-off renewed for another financial year.
SMSF compliance traps with bitcoin
Where Australia is at. Our leading indicators.
Foreign resident CGT withholding: early recognition of tax credit
ATO set to doorknock as 60% of cash-heavy businesses caught
New downsizing cap available
Capital Gains and Renounceable Rights
Treasury finds Australia 'increasingly uncompetitive' as US moves on tax plans
Australia's vital statistics
Our Advent calendar for 2017
SMSFs warned on ‘ticking time bomb’ with outdated deeds
Taxation ruling on commercial website deductibility
68% of SMEs ‘significantly stressed,’ 85% rely on accountants
Statutory wills are underutilised in estate planning
Small business slips on lodgement deadlines
Articles archive
Quarter 4 October - December 2017
Quarter 3 July - September 2017
Quarter 2 April - June 2017
Quarter 1 January - March 2017
Quarter 4 October - December 2016
Quarter 3 July - September 2016
Quarter 2 April - June 2016
Quarter 1 January - March 2016
Quarter 4 October - December 2015
Quarter 3 July - September 2015
Quarter 2 April - June 2015
Quarter 1 January - March 2015
Quarter 4 October - December 2014
Quarter 3 July - September 2014
Quarter 2 April - June 2014
Quarter 1 January - March 2014
Quarter 4 October - December 2013
Quarter 3 July - September 2013
Quarter 2 April - June 2013
Quarter 1 January - March 2013
Quarter 4 October - December 2012
Quarter 3 July - September 2012
Quarter 2 April - June 2012
Quarter 1 January - March 2012
Quarter 4 October - December 2011
Quarter 3 July - September 2011
Quarter 2 April - June 2011
Quarter 1 January - March 2011
Quarter 4 October - December 2010
Quarter 3 July - September 2010
Quarter 2 April - June 2010
Quarter 1 January - March 2010
Quarter 4 October - December 2009
Quarter 3 July - September 2009
Quarter 2 April - June 2009
Quarter 1 January - March 2009
Quarter 4 October - December 2008
Quarter 3 July - September 2008
Quarter 2 April - June 2008
Quarter 1 January - March 2008
Quarter 2 April - June 2007
Quarter 2 April - June 2006
Quarter 2 April - June 2004
Quarter 1 January - March 2004
Quarter 4 October - December 2003
Quarter 3 July - September 2003
Quarter 2 April - June 2003
Quarter 1 January - March 2003
Quarter 4 October - December 2002
Quarter 3 July - September 2002
Quarter 2 April - June 2002
Quarter 1 January - March 2002
Quarter 4 October - December 2001
Quarter 3 July - September 2001
Quarter 2 April - June 2001
Quarter 3 of 2003
Articles
Small Changes Make The Difference
Employees Activities Outside Work Hours
No Business? No Deduction!!
ABN Information Available Online
Minimum Superannuation Support
GST Errors on Business Activity Statement Returns
Late Lodgement Or Late Payment
No Depreciation for Rental Property Items
Donations ? Instant Tax Benefit
Workcover Deadline ? 5th September
Building and Construction Industry LSL Levy
Victorian Workcover Claims Obligations
Victorian Workcover Premium Obligations
GST Exemption ? Going Concern
Travel Expenses to Attend Company Annual General Meeting
PARTNERS' ANNOUNCEMENT
Enough for Retirement?
Company Directors ? Limit Your Liability
Compensation for Damage to Depreciable Asset Not Assessable
Rental Losses and Bankruptcy
Superannuation Fund and Instalments
ASIC Changes ? Update
Shareholder Loans
Unclaimed Super?
Non-resident for Tax Purposes
Discretionary Trusts Can Lose Small Business Concessions
Salary Sacrifice Arrangements
Small Changes Make The Difference
If you are going to make your business more profitable, you must have a strong understanding of the impact that small changes can have on the business.

Company A has 50 enquiries per day, with a conversion rate of 50%, so they deal with 25 customers each day.

The average unit price of the goods is $40, and on average, each customer buys 2 units. The average individual sale is $80. The total daily sales are $2000.

What happens if we make the following changes?

Increase conversions to 60%
Increase price by 10%
Increase units purchased by 10%

Now Company A has 30 customers per day, average price of $44 and an average quantity purchased is 2.2. The average individual sale is now $96.80.

Total daily sales have increased to $2,904?an increase of 42.5%.

If the business operates 5 days per week, over a 12-month period, this results in increased sales of $235,040, from $520,000 to $755,040.

If the business had an original gross profit margin of 40% the increase in price would lift the gross profit to 45.5%. The overall result is an additional $135,200 added to the bottom line.

Increases to conversion rate, price and quantities purchased become three strategies for growth. How can you increase our conversion rate? How can you increase the average quantity purchased? What small changes can you make that will have a massive impact?

Should you decrease price to stimulate sales? The impact of a price decrease on your level of sales and profitability can have a greater impact than you may think.

If the business above were to reduce its price by 10% (given a gross profit margin of 40%), the number of units sold would have to increase by 33% to ensure that the same level of profitability is maintained.

Are you prepared to increase your volume by 33% just to make sure that you don?t lose any money?

On the other hand, if the business increases its prices by 10%, sales volume would have to drop by 20% before the profitability is adversely affected.

If we assume that the number of customers and quantities sold remain the same, we can see the impact that a price decrease and increase has on the overall profitability of the business:
Item Now Price drop of 10% Price rise of 10%
Sales 520,000 468,000 572,000
COGS 312,000 312,000 312,000
Gross Profit 208,000 156,000 260,000
Overhead Costs 150,000 150,000 150,000
Net Profit 58,000 / 11.1% 6,000 / 2.1% 110,000 / 19.2%
Which is better, a price decrease or a price increase? What strategies are you going to implement to increase the prices in your business?
















30th-September-2003