Are your business systems efficient enough?
Many businesses struggle because the owner has not yet established efficient business systems or does not know how to best select them. This typically happens because the business owner is so caught up in the day-to day running of the business that the fundamentals of good business management get forgotten. It can be often said that the owner simply doesn’t like bookkeeping or other administrative tasks, so these are the typically the things that get put on the back burner.
Here are some typical symptoms, and the disastrous results:
- Poor or non-existent record-keeping.
- Tax obligations are not met.
- Invoices go out late and debts remain outstanding.
- One cashflow crisis after another.
- Goods and services are incorrectly costed and priced.
Any of the above factors can lead a business down the slippery path to failure, however, all can be avoided by implementing good systems and processes. It will allow business owners to free more of their time so to spend it working ON the business as opposed to in it.
Here are some tips on good business housekeeping:
To be in business and to remain in business, become a business person! In order to run a business, you must be business-like. It’s not sufficient just to be very good at what you do. Lots of people who are ‘very good at what they do’ have failed. The common cry: “I’m far too busy for that” is also no excuse. Are you ‘too busy’ to be a competent businessperson? If so, your business won’t last long. You must continue to develop your business skills.
to become a good businessperson you have to make the effort to become something of an ‘all rounder’, not just a specialist player. You can offer the best goods or services, but if you don’t develop good practices and business systems then you are not a fully rounded businessperson and your business will be at risk of of failure.
Remember that other stakeholders in your business, such as the building material suppliers who provide you credit and the banks who extend loans and financing terms, are also assessing your business skills. If you consistently pay people late or can’t meet the terms of your debt agreements they will draw the obvious conclusions about your business skills.
Good business systems will help you
By implementing good business systems you will make your business stronger, more efficient and easier to run. It will also make your business far more attractive to future buyers if you have developed clear operating procedures manuals. The business will be seen as an independently run viable unit that is not dependent on you the business owner.
Think for instance of what makes franchise groups so successful: it’s because they are designed so that people can buy a proven system and operate it after minimal training. They can do this because the business procedures are captured in simple, clear operating manuals.
5 steps to a better business:
- Good record-keeping and bookkeeping will help you keep on-side with the Australian Tax Office. If you’re able to meet your tax obligations through sensible planning you’ll sleep better at night. You won’t fear a tax audit and you’ll know at all times how your business is performing. You won’t be caught by a ‘sudden tax demand out of the blue’ because no such thing exists for a well-run business. You should always know which taxes are due, and when. You’ll suffer less stress as a result.
- Good constant business planning will help you set goals for your business, with specific steps on how to achieve these goals. Without goals, where do you think you’re going? Running a business without goals is like turning up at an airport and saying, “I’d really like to fly somewhere.” The person at the ticket desk would think there’s something wrong with you, to say the least!
- Good cashflow forecasting will enable you to anticipate a possible cashflow problem. This is something all growing businesses experience from time to time. Be on the front foot before the problem becomes a crisis. Banks will respect you if you anticipate problems and make plans in advance. Banks will not respect you—and will indeed categorise you as incompetent—if you tell them you’ve been ‘caught out’ by a crisis. Banks don’t like crisis. They like you to go to them well in advance of any possible crisis with a plan in hand. This shows them you’re in control of your business.
- Good creditor and debtor control will improve your cash flow. Invoicing promptly and collecting debts on time gives you the cash to pay suppliers on time and get more favourable credit terms from them. You need to be able to pay your creditors on time and to do this don’t let your debtors use you as a free banking service. With a good debtor management process and recovery it will make paying suppliers a lot easier and in turn reduce any stress and anxiety levels.
- Realistic pricing and costing will ensure that you run your business in a competitive and profitable way. Poor skills in this regard could mean that you’re operating at unrealistic levels—even at a loss. For example, if you let costs get out of hand like overhead costs your profits will erode. There is no point in increasing sales if you’re not increasing your profits.
In business you don’t have to be an expert at everything. For example, you might hate bookkeeping. Fine—but do get someone else to do it for you, don’t rely on a shoebox for your accounts! You should at least understand the processes and the overall accounting fundamentals even if you don’t want to do the ‘mundane work’ yourself.
Having poor systems is the road to stress and burnout. On the other hand good business systems will enable you to work smarter, not harder. You will have the ability to work ON rather than IN your business and avoid burnout. You will also be able to take time off work because you can train others to follow your clearly documented systems and procedures. Systems are the way to build a better business and liberate yourself from it.