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

Lift your gross profit margin with clear, practical steps

Your gross profit margin is the amount left from your sales after variable costs (such as inventory or direct job costs) are deducted. It shows how efficiently you turn sales into profit before overheads.

A quick example

If a retailer makes $1,000,000 in sales and the cost of goods sold is $650,000 for the same period, gross profit is $350,000 — a margin of 35%. If you lift the margin from 35% to 39%, gross profit increases from $350,000 to $390,000 — that is an extra $40,000. You may choose to invest a little more in overheads to achieve this (for example, better stock controls or training), but if the margin improves as planned, the return is worth it.

Where to focus

Not every idea will suit every business. Choose the levers that fit your model and customers.

Retailers

Reduce shrinkage and theft with tighter stock controls and regular counts.
Protect pricing — avoid unnecessary discounting and use structured promotions.
Minimise obsolete stock through smarter buying and ageing reports.
Review supplier terms for better unit pricing, early-payment discounts, or freight efficiencies.

Contractors and trades

Cut rework and wastage with clearer scopes, checklists, and job-close procedures.
Bill everything — materials, variations, and travel — with job-costing that captures line items automatically.
Lift team productivity with scheduling, standard times, and post-job reviews.
Price for risk and complexity, not just hours and materials.

Small changes, big impact

Target a handful of measurable actions — for example, a 1–2% price improvement on selected lines, a 0.5% reduction in stock loss, and capturing 100% of variations. These shifts compound to lift your overall margin and strengthen cashflow.

How we can help

We will help you identify the right margin levers for your business, then model the impact in our Cashflow & Profit Improvement Calculator so you can see the dollars before you commit. From there, we set up simple controls and a monthly margin review to keep results on track.

Next step

Don’t let thin margins drain your cash and working capital. Book a Cashflow & Profit Improvement Meeting and we’ll map the quickest path to a stronger gross profit.