The fifth cause of poor cashflow - Gross profit margins are too low

Anna Stubbs • April 19, 2024

Your gross profit margin is what is left from your total sales after variable costs are deducted.

For example, if you're a retailer and your sales in a given period are £1,000,000, and the cost of the goods you sell in that period is £650,000, then your gross profit margin is £350,000, or 35%.

In the above example, if you implement some strategies to improve the margin from 35% to 39%, your gross profit will improve from £350,000 to £390,000. That’s an increase in profit of £40,000. You may need to increase your overheads a little to get that increase, however, if you get the results, it will be well worth your investment and energy.


There are many ways to lift gross profit. Some will be appropriate for your business, and some won’t.


For example, if you’re a retailer, you could focus on reducing stock shrinkage and theft, avoiding some discounting, and making sure you minimise obsolete stock.

If you’re a contractor, you might focus on rework and wastage, ensuring all work and materials on jobs get billed, and team member productivity.


We can help you to determine the best strategies to lift your margins. We can then run your figures through our Cashflow & Profit Improvement Calculator to show you the impact of seemingly small changes.


Don’t let poor margins destroy your cashflow and working capital. Get some help from us to make a better plan.

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By Anna Stubbs • July 15, 2026
Healthy sales revenue numbers don't always mean your small business is profitable. It's easy to mistake rising sales and income for profitability. But unless you understand your operational costs, profit margins and net profit, you won't truly know whether the business is making long-term, sustainable profit.

Tax planning helps you do more with your money

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Is your small business up to date with employment law?

By Anna Stubbs • July 15, 2026
“Just 20% of SMEs identify regulatory compliance as an organisational priority, compared with almost a third of larger firms (32%). With little or no HR support and limited guidance, small businesses often lack awareness of employment law and may struggle to comply with the changes.” CIPD Labour Market Outlook, May 2026  The recent Labour Market Outlook report from the Chartered Institute of Personnel and Development (CIPD) shows that some small and medium-sized enterprises (SMEs) have a poor awareness of employment law and are not prioritising their regulatory duty as employers. But with the Employment Rights Act 2025 introducing several recent changes to UK employment law, it’s vital that your SME is aware of current employment law and your regulatory requirements as an employer. Five recent changes to employment law that came into force from April 2026.