Checking margins on items sold by matching all the costs of an item with the revenue that it has generated, you can determine the item’s margin. You should have a base margin that you feel is acceptable and drop any items where you are able to achieve this margin. Look at ways to increase your prices or reduce your costs to improve margins and manage cash flow.
Review your pricing to increase prices in line with the Consumer Price Index (CPI) increases and research your competition on their pricing. Increasing your prices will not always mean you will lose a lot of customers. When you improve the value and or the perceived value of an item or service, your customers are often happy to pay a little more.
Tips for presenting a price increase:
- Give your customer lead-time. Provide the customer with enough notice to allow them to make adjustments and to exercise at least one more order at the existing price.
- Do not allow your customer to find out about a price increase from your invoice. Any changes in pricing must come from the business owner perhaps in a formal letter outlining the need for the increase. (sufficient time should occur in the price increase timeline to allow at least one invoice to contain a note of pending increase in price).
- Avoid showing favourites. Pricing integrity is always essential but especially so during a price change. Do not treat particular customers more favourably than others in pricing during an increase. Different pricing levels re fine as long as they can be logically defended so that a customer who is not receiving the price break and understand and accept the price increase.
Price increases are again growing more common and acceptable as long as they are well thought through and not seen as a way to merely increase profits.
Reference: the balance: How to Sell a Price Increase to Your Customers
As Cash Flow Strategist and professional bookkeepers Accountant Ready Books can assist with identifying your cash flow problems. Once detected we can then implement cash flow strategies to defeat cash flow crisis helping to grow your business with solid cash flow management.
