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How to Determine Your Most Profitable Client

Mar 2, 2021 11:08:00 AM Kathy Dise Profitability

bigstock-Business-Success-Goal-Achiev-392678510So many small businesses think chasing the biggest companies with the largest accounts is the answer. Just because you earn a lot of business from a client doesn’t necessarily mean they are the most valuable or most profitable. Consider the amount of time your team puts into the client and what the client’s revenue cycle is. Do they have steady or lumpy orders? Do they pay quickly or take a while to pay you? Are they always beating you up for a discount?

Here are some tips on knowing who your most profitable clients are:

1. Know Your Definition of "Most Profitable"

  1. It’s not always the largest “sales” account
  2. Consider the total dollar amount that client brings to your bottom line
  3. Take a look at margins too; smaller clients might drive more to the bottom line - Pull a P&L and then filter by client in QuickBooks

2. Know Your Customer's Business

  1. What is their anticipated annual spend with you?
  2. Are they seasonal? How often will they order from you?
  3. Who do they have to get paid from, in order to pay you?
  4. What economic factors might influence their ability to pay you?

3. Analyze Your Client Data Across Both Historical Financial Reports (Bookkeeping) & Future Pipeline Reports (CRM)

  1. Run a P&L and AR Aging by customer, comparing Year over Year
  2. Pull a pipeline report showing open, closed & lost deals by client

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4. Implement Time Tracking to Evaluate the True Cost to Service Your Client

  • We recommend basic tracking with excel or consider other software like Ebillity, QuickBooks Online, Tsheets or ADP.

5. Take a Holistic View of All These Items and Compare to the Largest Accounts. Surprised?

TIP: How to enter time tracking with QuickBooks

  • Send money out to Payroll Clearing
  • Allocate to client with a Journal Entry or Zero Balance Check
  • Make sure Payroll Clearing = 0 at the end of each pay

Taking into consideration all these factors plus the tangible financial results, you should be able to quickly evaluate your most profitable client. Are you surprised by the findings? Let us know if these tips helped you or if you need help determining your most profitable client. 

Kathy Dise

Written by Kathy Dise

Kathy has over 30 years experience helping small businesses succeed. As a commercial lender, commercialization expert and now as a QuickBooks diamond level advisor, Kathy understands the challenges small business owners face. Her experience helps business owners quickly accomplish their financial goals. As the owner of BudgetEase, Kathy works with clients to develop a plan to efficiently process 1,000s of small transactions so owners can make informed decisions. She lives in Shaker Heights, OH with her husband Ralph and enjoys golf, curling and walking in Cleveland’s fabulous Metro Parks.