The cheapest and most effective upgrade is buying an oversized bushing and having a gunsmith custom fit it to the slide. A much more expensive (and largely useless) approach would be tightening the slide to frame fit. Many people think that a "tight" gun is synonymous with accuracy, but in reality the slide to frame fit has very little to do with accuracy, since both sights are mounted on the slide.
The barrel lockup is also critical to a 1911's accuracy. With the hammer down, press down on the barrel hood. If it doesn't budge – great, if there's a tiny bit of movement, you're probably okay too, but if there's significant slop, you've got a problem.
P.S. I'm writing this under the assumption that 5" groups were achieved shooting form a rest.