If you're a business owner who offers multiple products or services, here's a question:
Do you know which ones are actually making you money?
For many businesses, the answer is surprisingly no.
One of the most common issues we see at Bidwell Accountancy is businesses recording all sales under one turnover code and all costs under one expense code. While this is enough to produce your year-end accounts, it doesn't give you the information you need to make informed business decisions.
One Turnover Figure Tells You Very Little
Imagine your business provides:
Consultancy
Installation
Maintenance contracts
Product sales
At the end of the month, your accounting software shows:
Sales: £100,000
That sounds great.
But how much of that came from each service? More importantly, which of those services actually generated the profit?
Without splitting your income, you simply don't know.
The Same Applies to Your Direct Costs
It's not just about separating your sales.
You should also allocate your direct costs against each product or service.
For example:
|
Service |
Sales |
Direct Costs |
Gross Profit |
Gross Margin |
|
|
|
|
|
|
|
Consultancy |
£30,000 |
£5,000 |
£25,000 |
83% |
|
Installation |
£40,000 |
£28,000 |
£12,000 |
30% |
|
Maintenance |
£20,000 |
£8,000 |
£12,000 |
60% |
|
Product Sales |
£10,000 |
£11,000 |
-£1,000 |
-10% |
Looking only at total turnover, you'd never realise that one part of your business is actually losing money.
Not Every Pound of Revenue Is Equal
Many business owners focus on growing sales.
But higher turnover doesn't always mean higher profits.
You could be:
Making a 50% margin on one service
Breaking even on another
Losing 20% on a third
If you don't separate your income and costs, the profitable areas are simply masking the underperforming ones.
Better Data Leads to Better Decisions
Once your income and direct costs are separated, you'll gain valuable insights that help answer questions like:
Which services are most profitable?
Which customers buy your highest-margin work?
Should you increase prices on certain services?
Are there products you should stop offering?
Where should you focus your marketing budget?
Which departments or teams are performing best?
These are decisions based on facts rather than guesswork.
Modern Accounting Software Makes This Easy
Cloud accounting software such as Xero, QuickBooks and Sage allows you to create multiple sales and cost codes.
For example, instead of using one generic sales code, you could have:
Consultancy Income
Installation Income
Maintenance Income
Product Sales
Training Income
You can then mirror these within your direct cost codes, making it easy to produce meaningful gross profit reports at any time.
It's Like Running Multiple Businesses Inside One Company
Think of each service line as its own mini business.
Each should have its own:
Revenue
Direct costs
Gross profit
Gross margin
Only then can you clearly see what's driving your profits—and what's quietly reducing them.
Small Change, Big Impact
Changing your chart of accounts takes very little time, but the benefits can be significant.
Instead of simply knowing how much turnover you've achieved, you'll understand:
Which services deserve more investment
Which products may need a price increase
Which areas are underperforming
How to maximise your overall profitability
That's the kind of financial information that helps businesses grow.
How Bidwell Accountancy Can Help
At Bidwell Accountancy, we don't just prepare accounts—we help business owners understand the numbers behind their business.
We can help you:
Review your chart of accounts
Set up meaningful income and expense categories
Produce service-by-service profitability reports
Build management reports that support better decision-making
Identify where your business is making—and losing—money
The better your financial information, the better your business decisions.
Ready to Understand Where Your Profit Really Comes From?
If your accounts currently show just one sales figure and one cost figure, it may be time to take a closer look.
Get in touch with Bidwell Accountancy today and let us help you turn your accounting data into meaningful business insights that drive growth and profitability.
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