Many businesses celebrate growing revenue as a sign of success – and rightly so. But revenue alone doesn’t tell the full story. What really drives sustainable financial health is gross profit. If margins are narrowing, higher sales may require greater effort, so focusing on improving both sales growth and efficiency helps support stronger returns.
The good news? Protecting gross profit doesn’t have to involve big projects or major operational shifts. Small, intentional improvements can have a powerful impact on your bottom line. Here are some practical ways to safeguard your margins and strengthen your business’s financial performance.
Focus on high-margin products and channels
Most stock, sales, and job management systems allow you to analyse performance by product, customer, or channel. The key is ensuring that all pricing arrangements – including discounts, rebates, early-payment terms, and incentives are captured correctly so your margin data is accurate.
Regularly reviewing this information helps you:
- Identify top-performing, high-margin products
- Scale back or reprice low-profit lines
- Understand which channels dilute your margin
- Make smarter decisions about product mix
Shifting even a small amount of effort toward higher-margin products or channels can lift gross profit without increasing your workload.
Strengthen inventory management to prevent write-offs
Excess, slow-moving, or obsolete stock quietly reduces profit through write-downs and carrying costs.
A proactive approach can make a big difference. Consider:
- Demand forecasting and realistic reorder points
- A cross-functional approach, where warehouse and sales teams work together to identify stock at risk of early write-off
- Regular stock health reviews to re-merchandise, bundle, or clear slow movers
Better inventory discipline helps free up cash and reduces unexpected impacts on your margin.
Manage foreign exchange exposure early
For importers, even small movements in exchange rates can significantly impact landed costs. Many pricing decisions are made using an assumed exchange rate, but fluctuations between order and arrival can reduce margin before the stock reaches your shelves.
To stay ahead:
- Monitor exchange rates regularly
- Use forward exchange contracts to lock in certainty
- Review selling prices when foreign exchange impacts become material
A little attention here can prevent margin loss that’s otherwise easy to miss.
Keep quoting inputs current
If you quote jobs or project work, outdated inputs can cause under- or over-quoting. Protect your profitability by maintaining:
- Accurate labour rates (including on-costs and overheads)
- Realistic cycle times and material costs
After each job, compare actuals vs estimates and feed any insights back into your quoting model. This simple loop helps ensure future quotes are accurate, competitive, and profitable.
Tighten pricing and discount discipline
Pricing is one of the most powerful levers for protecting gross profit – but it’s also one of the easiest areas to reduce if decisions are made reactively.
Consider implementing:
- Scheduled price reviews, quarterly or twice per year
- Clear guidelines around who can approve discounts and when
- Value-based pricing for high‑service or differentiated offerings
Keep in mind that if your gross margin is 30% and you offer a 5% discount, you must sell 20% more just to earn the same gross profit.
Small discounts can demand big volume increases, so use them thoughtfully and strategically.
Next steps
We’re here to help you strengthen profitability. Improving gross profit doesn’t need to feel overwhelming. Many meaningful improvements come from better systems, clearer pricing approaches, and more informed analysis.
At Nexia Australia, our experts work alongside businesses every day to review margins, refine pricing models and improve cost allocation methods.
Whether you’d like support reviewing your margins, updating your pricing model, or improving cost insights, our team is here to support you. Speak with your local Nexia Advisor today to explore how smarter decision-making can help build a stronger, more profitable business and support your long-term potential.
Written by Amanda Billington from Auckland
