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Efficient business systems really pay off

News Article: February 23, 2018 by dwaoaktree Save Money

Too many businesses fall over because the owner has not established efficient business systems. This typically happens due to being so caught up in the day-to day running of the business, that the fundamentals of good business management is forgotten. Also it is often said that the owner simply doesn’t like bookkeeping or other administrative tasks, and so these are put on the back burner.

The following symptoms are familiar, and their results, disastrous:

• Poor or non-existent record-keeping.
• Unmet Tax Obligations.
• Late invoicing and uncollected debts.
• One cashflow crisis after another.
• Incorrectly priced goods and services.

Any of these factors can lead a business down the slippery path to failure, but it is all avoidable. The whole point of implementing good systems is that they free you up to spend more time working ON your business, not in it. Here are some tips on good business housekeeping.

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 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 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 your business is 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 will make your business stronger, more efficient and easier to run. They will also make your business far more attractive to future buyers. If you have developed clear operating and procedures manuals, your business will be seen as an independently viable entity and less dependent on you.

Think 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:

1. 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 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.

 

2. Good business planning will help you set goals for your business, if it includes 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 go somewhere.” The person at the ticket desk would think you’re clueless, to say the least!

 

3. 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. 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 crises. 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 charge of your business.

 

4. 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. It is a virtuous circle. Sloppiness in this department is one of the most common (and unnecessary) causes of business owners experiencing stress and anxiety. So pay your creditors on time, and don’t let your debtors use you as a free banking service.

 

5. 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—even at a loss. For example, if you let costs get out of hand (such as 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! And you should at least understand the processes and the overall accounting picture even if you don’t want to do the ‘drudge 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 and free you to work on your business, rather than in it. This way, you’re more likely to avoid burnout and you’ll 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.

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