Just exactly who are your top customers? Wouldn’t you like to have more? I recently wrote an article on 9 Tips to Dazzle your Top Customers and suggested you look at the Sales by customer report. However, that’s only a partial story. You may have some big sales, but your costs could be high, as well, so total sales is not a complete picture. So here are 5 areas to consider.
- Identify Your Most Profitable Customers: Look at the Job Profitability Summary report. It will run on an accrual basis only, so you could have some unpaid invoices in there. But hopefully your customers will be forthcoming with payment. The default date range is all, since some jobs cross over years, and in some cases, multiple years. If that’s true for you, then you may want to keep that setting. But for most of you, the jobs tend to be shorter, so I would recommend running it just for the year (this year or last). For the purposes of identifying the top customers, you can collapse the report so you just have the customer names. Export the report to Excel and then you can sort for the Difference column which should be your profit. Of course, this assumes you’ve been good about costing all your labor and materials to the job. For those of you who outsource your payroll, you may find that not all your labor costs are in.
- Identify Your Most Profitable Types of Customers: When you look at the top customers above, do you see a pattern as to the type of customer? Perhaps they’re commercial or government or residential or landlords, or …. You get the picture. (I use industry for type). You can also use subtypes. If you want more top customers, it’s helpful to have a better picture of just who they are.
If you use the Customer Type field, you can create a Custom Summary report with Customer Type for column headings.
- Identify Your Most Profitable Jobs: You can go back to that same Job Profitability Summary Report and run it so you see the list of jobs below. You can export this out to Excel as is or filter on the customers you identified above. Unless all your jobs have unique names/numbers this will take more work before you can easily sort in Excel. Perhaps the quickest way is to copy the customer name down so it is with the job name and then sort by Difference (your profit). You can use the Auto Filter feature in Excel to remove the rows with blanks in the job column.
Also look to see if there is a pattern in the type of job you do for that customer. Some types of jobs are more profitable than others. Makes more sense to stick to the more profitable jobs!
- Identify Your Most Profitable Division/Service Line: If your divisions or service lines or departments are classes, this can be simple to evaluate. Run your P & L by Class, then customize the report so you can see % of Row. Then not only will you have a comparison by dollar amount, but the percent of your business income AND expenses. If you take the time to allocate your overhead (either on a monthly or quarterly basis), you can get an even better picture.
- Identify your Most Profitable Products/Services – If your Items are double-sided, AND you use the items tab when you receive your bills, then the Item Profitability Report could be helpful as well. Is it time to drop a service or product? Or maybe you want to sell more of a particular product or service line.
As you go through these steps, you might also want to take note of which ones are the bottom of the list. Perhaps it’s time to drop those customers, jobs, products or services.
When you can identify your true top customers and jobs, then you have a better idea of how to market, and you can focus on more profitable customers and jobs, which will boost your bottom line rather than trying to be everything to everyone.
If you need help getting this setup in QuickBooks, contact our office.
Would love to hear if you had any “a-ha’s” as you look at these reports!