As your business grows, understanding where you are most profitable becomes crucial. This can be analyzed by 3 different categories: clients, products/services, and sales channels. Let’s break down each one to see how you can leverage QuickBooks Online to determine your profitability.
- Types of Clients
Identifying the profitability of different client types can provide valuable insights. For example, if you’re a landscaper, you might serve both commercial and residential clients. Using QuickBooks Online, you can set up “Classes” or “Locations” to track income and expenses for each client type. By designating each transaction accordingly, you can generate profit and loss statements for commercial and residential clients separately. This helps you understand which client type is more profitable and where to focus your efforts.
- Products and Services
Whether you run a retail store with numerous products or offer a few consulting services, tracking the profitability of each product or service is essential. In QuickBooks Online, products and services are categorized under “Items”. When you create an invoice or record an expense, you can specify the product or service involved. This allows you to see which products or services contribute most to your bottom line, helping you make informed decisions about inventory and service offerings.
- Sales Channels
Many businesses sell their products through multiple channels, such as online platforms and retail stores. In QuickBooks Online, you can treat each channel as a customer. By associating expenses with the respective sales channel, you can analyze the profitability of each one. For instance, if you sell products both online and in stores like Whole Foods or CVS, tracking these channels separately will reveal which is more profitable. This insight can guide your strategy to focus on the most lucrative channels.
Conclusion
As your business evolves, conducting a profitability analysis by client, product/service, and sales channel can provide a clear picture of where your profits are coming from. This information is invaluable for making strategic decisions that enhance your business’s financial health.
If you need assistance setting up QuickBooks Online to track these metrics, we’re here to help. Understanding your profitability is the first step towards a more successful and sustainable business. Contact BudgetEase Today!
I hope you found this guide helpful. If you have any questions or need further assistance, feel free to reach out. We’re committed to helping you achieve your financial goals.
