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Interactive Diagnostic

Stratford-upon-Avon

13 The Courtyard
Timothy's Bridge Road
Stratford-Upon-Avon
Warwickshire CV37 9NP

01789 294484

enquiries@gjassociates.co.uk

London

7-8 Stratford Place
Mayfair
London
W1C 1AY

0207 495 0304

enquiries@gjassociates.co.uk

Why breakeven analysis can be illuminating

If you focus your energy on sales, there is a chance that your efforts will produce losses. Which is why we always encourage our business clients to keep their accounting records using software that automatically produces monthly management accounts that reveal profitability as well as turnover and costs.

But there is another useful indicator that you can compute once you have these monthly trading results. It is the level of turnover you need to achieve – based on current costs – in order to breakeven, make no profit, but importantly, no loss.

If you provide services, rather than process goods for resale, the amount of turnover you need to create each month to breakeven will be your total monthly costs plus any remuneration you take from the business.

For example, if your costs are £35,000 and your monthly remuneration not included in those costs (dividends perhaps or drawings if self-employed) a further £5,000, then your current breakeven turnover is £40,000 a month.

The calculation is slightly different if you process or buy and sell goods for resale as each £1 of sales will need to cover the direct costs – of buying and processing goods – as well as other fixed overheads that do not change with the level of turnover achieved. To calculate a breakeven figure, you will need to divide your fixed costs by the gross profit percentage and multiply by 100. So, if fixed costs are £40,000 a month and your gross profit percentage (sales less direct costs as a percentage of sales) is 25%, your breakeven turnover would need to be (£40,000/25 x 100) £160,000. At this level of trading, you would produce £160,000 times 25% – £40,000 of gross profit which would exactly cover your fixed costs.

Obviously, to make progress financially, you would need to achieve sales in excess of your breakeven turnover. Never-the-less, this is a useful indictor to have as when you achieve this target you will know that any additional sales will be creating profits for your business.

If you have the data, we can help you produce a realistic breakeven figure for your business. Please call to organise.

Grenfell James Technology Adoption Index

How does your business perform against others adopting financial tech? Find out with our interactive diagnostic:

1.

How does your business receive invoices?

A)

Invoices are mainly received in paper form

B)

Invoices are mainly received by email

C)

Invoices are emailed then automatically forwarded to a designated mailbox

2.

How are purchase invoices processed?

A)

Invoices are entered manually

B)

Invoices are attached to manually raised invoices

C)

Automated software (e.g. ReceiptBank, 1Tap, HubDoc etc) collates invoices

3.

How are accounts processed?

A)

Using Excel/paper-based

B)

Using Computer-based, offline software

C)

Using cloud-based accountancy software

4.

How often is business data revised?

A)

Data is updated annually

B)

Data is updated quarterly

C)

Data is updated monthly or more often

5.

How is banking updated for your business?

A)

Banking is updated manually

B)

Banking is updated by imports

C)

Banking is updated via a live feed

6.

How are bank payments made?

A)

Bank payments are manual

B)

Bank payments are made using bulk imports

C)

Bank payments are made directly via accounting software

7.

How are bank receipts reconciled?

A)

Receipts are chased and reconciled manually

B)

Receipts are chased and reconciled automatically

C)

A third-party platform is used to chase debts and collect fees

8.

How often are management reports produced?

A)

No reports are provided

B)

Reports are provided but often too late to be valuable

C)

Reports are automated with real-time information

Score 8-12:

Curious Exploration

Your financial technology phase is Curious Exploration

% of respondent businesses are in this phase too.

Switching accountancy systems may seem like an upheaval, but can be much more straightforward than most businesses imagine. From talking to our clients, they have found moving from paper invoicing and desktop-based accounting software to the cloud and apps quickly makes the transition process a worthwhile investment of time. Digital accounting solutions bring in streamlined processes, up-to-date business data and greater confidence in the accuracy of information when making financial decisions.

Grenfell James works with your team to fully assess the needs of your business and minimise the impact of any transitions for solutions we recommend.

Find out more about App Advisory

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Score 13-19:

Measured Discovery

Your financial technology phase is Measured Discovery

% of respondent businesses are in this phase too.

Once cloud accountancy software is in place, there’s still plenty of scope to improve your accountancy processes and make sure your business is maximising the benefits of adopting a digital accounting solution. Grenfell James assesses each business to understand how any implemented solutions are being used, identify areas for improvement and the needs of the business overall to support your business goals and achieve success.

Our team of experts can discuss a range of time-saving automation and get different apps and cloud-based solutions talking to create and manage a digital accountancy eco-system to help your business grow.

Find out more about App Advisory

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Score 20-24:

Bold Innovation

Your financial technology phase is Bold Innovation

% of respondent businesses are in this phase too.

You know the benefits of accounting technology and the impact it can have on your business goals. If you want to take it a step further, our team can conduct a systematic review of your processes, apps and business goals to ensure your digital accountancy ecosystem is keeping pace with the changing needs of a growing business.