Too many businesses fall over because the owner has not established an efficient business systems. 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 is forgotten. Often too it must be said that the owner simply does not like bookkeeping or other administrative tasks, so these important administrative task gets put on the back burner.
The symptoms are familiar, and their results disastrous:
Poor or non-existent record-keeping.
Tax obligations are not met.
Invoices go out late and debts remain uncollected.
There is one cashflow crisis after another.
Goods and services are incorrectly costed and priced.
To be in business and to remain in business, you need to become a business person! In order to run a business, you must be business-like. It is not sufficient just to be excellent at what you do. Lots of people who are ‘very good at what they do’ have failed.
Remember that other stakeholders in your business, such as the building material suppliers who give you credit and the bankers who extend loans and financing terms, are always assessing your business skills. If you consistently pay people late or cannot meet the terms of your debt agreements, they will draw the obvious conclusions about your business skills.
How good business systems will help you
Good business systems will make your business stronger, more efficient and easier to run.
Think for instance about what makes the franchises system so successful. It is 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.
Here are five steps to a better business:
Good record-keeping and bookkeeping will help you get on the good side of the Inland Revenue Department. If you are able to meet your tax obligations through sensible planning you will sleep better at night. You will not fear a tax audit and you will know how your business is doing. You will not 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. That way, you will suffer less stress.
Good 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 are going?
Good cashflow forecasting will enable you to anticipate a possible cashflow problem (something all growing businesses experience from time to time) and take steps before the problem becomes a crisis.
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.
Realistic pricing and costing will ensure that you run your business in a competitive but profitable way. Poor skills in this regard could mean that you are operating at an unrealistic level — even at a loss.
In business you do not have to be an expert at everything. For example, you might hate bookkeeping. That is fine, but do get somebody else to do it for you, do not merely rely on a shoebox for your accounts! You should also at least understand the processes and overall accounting picture even if you do not want to do the “drudge work” yourself.
Having a poor system is the road to stress and burnout. On the other hand, a good business system will enable you to work smarter, not harder.
Disclaimer: The Materials are provided for general information purposes only and are not intended as professional advice and should not be substituted for, or replace, such professional advice.