UK Process and/or software tool to help identify profitable/non-profitable parts of business?


psa

Joined
Apr 11, 2021
Messages
1
Reaction score
0
Country
United Kingdom
Hello,

Apologies in advance for the long post but as I don't know much about accounting, I figured it'll be better to provide more info/context than less. There may well be super simple answer to this :)

Background
I run a small business providing consulting service. We have 2 full-time employees and the remainder of consultants who work for us are on a "hire as needed" basis. Consultants rates are dependent on their skillset/experience. Each year I spend a couple of days classifying business incomings and outgoings, which I then send off to my accountant to complete/submit our business accounts. Also, my accountant, whilst super dependable, is not the most 'dynamic' (they wouldn't mind me saying so!).

Over the years, we have been able to adapt our services to different industries, and also to different niches within each industry. The method of, and mechanism for delivering our services for each of these industries/niches is different, and so although the underlying service is the same, the costs to deliver are different. Also, demand from the various niches/industries are cyclical across the year, and so revenue tends to be in spurts and spates from the various industries/niches, at different times of the year.

The business has been profitable overall however the pandemic is putting a strain on revenues, and so going forward we are having to be more careful how/where we invest our efforts in:
  • I have a sense that not all niches/industries that we serve are as profitable as each other and also that some parts of the business (the profitable ones) are subsiding other parts of the business (loss-making parts).
  • E.g., there have been times when we have "seconded" a consultant with a higher rate who usually works on a more profitable part of the business, onto a project/niche industry that we know isn't as profitable (for the sake of keeping the customer happy).

Question
What I would like to do is put a process in place that will enable me to pay closer attention to incomings/outgoings for each of the individual niches/industries that we serve, in order that I can make an informed decisions on an ongoing basis, as to which industries/niches to focus on (for profitability) or abandon (due to loss-making). I would also like to be able to do things like "charge" the cost of seconding the more expensive consultant to the less profitable project/niche industry in order to show a true reflection of which aspects of the business are profitable/loss-making

Could someone recommend a software platform/process which:
  • I can link to/integrate with Stripe and PayPal (all our payments are collected online)
  • Would enable me to (manually) classify all incomings and outgoings by industry/niche
  • Would provide reports on the relative profitability/loss-making operations by the industry/niches that we service
  • Even better would be if the tool could 'learn' from my manual classifications and over time, improve on or even become expert at classifying with little effort from me
Or is this sort of functionality provided by most accounting packages, but through accounting reports? I have a background in computing/engineering, and so I'm comfortable integrating software from different vendors where possible/needed.

Is there a name for this type of accounting? In my (very naive!) searches online, I came across "Project Accounting", however that doesn't seem to be what I'm looking for as I'm more interested in profitability/loss-making trends over longer periods of time across industries/niches, and less interested in individual customers/specific projects.

I appreciate that I could probably achieve the above using spreadsheets, however this would require time to set-up and will likely be 'clunky' to maintain and I much prefer to spend the least time tracking this whilst getting the most benefit (by paying for a service).

Thanks in advance for any suggestions, and once again, apologies for the newbie-type question (and the length)!

P.
 
Ad

Advertisements

Joined
Apr 11, 2021
Messages
16
Reaction score
1
Country
United Kingdom
Hi

The software I use with my clients is Xero.
With Xero, you can achieve your goals by setting up cost centres and doing cost centre accounting. Each individual niche would be a cost centre. Xero comes with a trial, so you can test it before signing up to it. I like Xero because it is very versatile.
If you need any more help with doing this on Xero, please post back with a specific question.


Kind regards
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top