Too many businesses fall over because owners fail to establish efficient business systems. This typically happens because most business owners get so caught up in the day-to-day running of their businesses that they end up neglecting the fundamentals of good business management.
Bookkeeping and other administrative tasks are usually thought of as chores by many owners which is why they’re put on the back burner.
The symptoms are familiar and the results disastrous.
- Poor or non-existent record-keeping.
- Tax obligations not being met.
- Invoices going out late. Debts remaining uncollected.
- Cash flow crises coming one after the other.
- Incorrect costing and pricing of goods and services.
Any of these factors can lead the business down the slippery path to failure, but all are avoidable. The whole point about putting in good systems is that they free you to spend more time working ON your business, not in it. Here are some tips on good business housekeeping
Fortunately with a bit of planning all of these are avoidable. It is essential that you take the time to implement good systems in your business. Although this can take some time in the beginning it will save you time moving forward and free up your schedule to allow you more time to work ON your business and not in it.
Be business-like
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 business person? If so, your business won’t last long. You must continue to develop your business skills.
To be a businessperson you have to make the effort to become something of an ‘all rounder’, not just a specialist player. You can offer outstanding goods or services, but if you don’t develop good business systems then you are not a fully rounded businessperson and your business will be in danger of failing.
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 can’t 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 and processes will make your business stronger, more efficient and easier to run. They will also make your business far more attractive to future buyers because if you have developed clear operating and procedures manuals the business will be seen as an independently viable unit and less dependent on you.
Think for instance of what makes franchises 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.
Here are five steps to a better business:
- Good record-keeping and bookkeeping systems will help you keep on-side with the Inland Revenue Department. If you’re able to meet your tax obligations through sensible planning, you’ll sleep better at night. You can also avoid worrying about tax audits and you will have a better understanding of how your business is doing. 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.
- Good business planning will help you set realistic goals for your business and identify specific steps on how to achieve them. Without goals where is your business headed? Running a business without goals is like turning up at an airport and saying, “A ticket to somewhere, please.” The person at the ticket desk would think you were crazy.
- Good cash flow forecasting enables you to anticipate any possible cash flow problems (something all growing businesses experience from time to time) and develop strategies to prevent them. 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 appreciate crises. Show them you’re truly in charge of your business by going to them well in advance of any possible issues with a plan in hand.
- Good creditor and debtor control improves your cash flow. Prompt invoicing and debt collection gives you the cash you need to pay suppliers on time and get more favourable credit terms from them. It’s a virtuous cycle. Sloppiness in this department is one of the most common (and unnecessary) causes of business owners’ stress and anxiety. Pay your creditors on time and don’t let your creditors use you as a free banking service.
- 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’re operating at unrealistic levels or even at a loss. Note that there’s no point in increasing sales if you’re not increasing profits.
In business you don’t really have to be an expert at everything, just make sure you have access to people who are. If you hate bookkeeping and accounting tasks, hire someone to do these things for you, this ensures they get done without you having to worry about it.
It’s having poor systems increases stress and increases your chances of burning out. Good business processes will enable you to work smarter, not harder giving you more time to focus on what you need to. Systems help you build a better business and liberate yourself from it.