Tracking your gross profit margin (GPM) is one of the most crucial financial metrics for small and medium-sized businesses (SMBs). GPM helps business owners understand how efficiently they manage production costs in relation to revenue, providing insights into profitability and pricing strategy. A healthy GPM ensures that your business is retaining enough profit after covering the cost of goods sold (COGS) to sustain operations and plan for future growth.

However, it’s essential to recognize that gross profit margin and cash flow are different. While GPM reflects profitability, cash flow measures the money moving in and out of the business. Strong profit margins don’t always guarantee strong cash flow, so SMB owners need to monitor both closely.

By consistently tracking GPM and understanding how it impacts cash flow, SMBs can improve financial health, plan for sustainable growth, and remain competitive in their industries.

Intro Australia has been in a per capita recession for several months. Some businesses are thriving, while others, particularly those dependent on discretionary spending, are struggling. As accountants, your skills are critical in both scenarios. Business Advice: The Power of 1% Scenario 1 – Your client’s crushing it Your client’s gross and net margins are […]