Accounting: A Profit Planning Gadget For Small Businesses

Accounting: A Profit Planning Gadget For Small Businesses

May 18, 2020 8 By mindmingles

Accounting, when pursued by the students as a subject to acquire advanced degrees, has a host of career scope. Likewise, when it comes to estimating the affirmations on small businesses, accounting has proved itself as a simple tool that helps large and small scale businesses reap more revenue and profit. 

As per the experts who offer Accounting online, Accounting systems are not only meant for reporting and preparing the year-end Federal and State tax returns. Instead, businesses should proactively use Accounting to deal with unforeseen business conditions. If you want to maximise opportunities and minimise risk, budgeting, planning, and analysis are the go-to methods. However, without Accounting, there will be a significant shortfall in businesses. Hence, here are some points showing how accounting helps small business generate profit:

  • Apply Pareto Analysis (The 80/20 Rule)

The 80/20 rule or Pareto Analysis is based on the idea that a limited number of tasks produce a significant effect. This translates as 80% of revenues generated by businesses are an outcome of 20% of total products or services sales. Likewise, 20% of the clientele commands 80% of business resources.

The significance of accounting here is to decipher and analyse business aspectsto find out the best means to grow the business. With clear information fetched, companies can focus on time, resources, and workforce to achieve the best product mix, opines the experts of accounting assignment help services. 

  • Develop Short, Mid, And Long-Term Goals

A business takes time to grow. Hence, creating a strategy based on the financial statements of five years’ only improves the chances of gaining more profit. Leading strategists believe that the growth of business processes is compound. Hence, organisations should invest and generate money according to short, mid, and long-term goals. This will help the organisations oversee their strategic plan and check whether the outcome has matched the objectives or not. 

  • Track Advertising Investments

The accountant employed in an organisation can forecast what the rate of return is for every penny spent on advertising and marketing of products/services. While it’s common for large enterprises to monitor the return of promotional activities, small businesses usually don’t do that.

So, for small businesses, accountants can measure the return of promotional strategies. The accountant estimates if a plan has produced enough sales and additional profit for the company. This provides an idea of whether it is worthwhile spending the money on promotional activities at all. 

  • Profit and Ratio Analysis

Business ratios can be analysed and compared with other similar companies to determine how well has a small business performed. These data also help see things from the outside. Hire a trusted professional to find answers about high profit and fewer expenses, and higher margin and industry average. 

  • Take Advantage of Trend Analysis

Numerous factors affect businesses. Change in the price of raw materials or a shift in buying habits is some of them. As for small-scale companies, analysis of trends is important.

The resultant trends can be implemented to minimise the potential negative impact or take advantage of a potential benefit factor. Accounting allows small business to figure out the profitable trends, as well as potential negative consequences, and build business decisions around those.

  • Maximise Pricing

An accountant can maximise business profit by merely reviewing the current price levels. Calculated maximisation of pricing of products and services can boost sales, and market profits. 

Being a small business, organisations often delay pricing surge. They fear to lose the market, clientele, and sales. An accountant is the right person to figure out whether a price rise is long overdue or if it will harm the business.

  • Identify Valuable Customers

Accountants can help businesses determine which customers are the most valuable. They can do that by analysing the complete customer database and studying the profitability that each customer has brought in. 

Hence, accounting studies every customer data that has purchased a product or availed a service from the organisation. While businesses can focus on developing growing business profits and surviving competition, an accountant can use the time to understand customer behaviour.  

Often an accountant sees the scope for improvement which business owners miss. It’s like the third-person opinion that can help you see the possibilities and risks of the organisation. 

Along with the ways mentioned above, factors like finance restructuring, analysing expense and labour cost reviewing can also contribute to profit-making. 


Apart from helping businesses bring in the maximum profit, Accounting expert will focuses on those business activities that justify monetary decision making of small-scale enterprises. Read the article to know how accounting can help small firms mint more profit.