Break-even Points And Benchmarking

Accountants often educate their clients on their break-even threshold. Break-even points are relevant to all businesses – no matter their size.

So, why is your break-even point so important?
 
How can you decide on what price to sell your products, or services at, prepare a forecasting budget or write a business plan, if you do not know how many ‘widgets’ you need to sell to cover your costs and make money? This is your break-even point.
 
You may have a high turnover but still run at a loss, because your product or service is not priced high enough to make a profit. To make a profit, you need to understand the level of turnover you need to cover your operating expenses and make money.
 
You should aim to undertake regular financial health checks with your accountant, so you know your critical break-even point, ensure your business remains viable, make sure costs are realistic, and that you understand the turnover required to make a profit.
 
Benchmarking tools are also useful to measure key business metrics and practices and compare them to similar industry standards. Your accountant can then identify areas where improvements can be made and opportunities for growth explored.
 
Do you know what your break-even point is?

Contributed with thanks to Accountancy Plus Whitsunday Services

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