When you start a new project for your clients you probably have certain routines to get them up and running. Everything runs a certain way when you do business, from quoting for the job, scheduling it in your calendar of work commitments, to making sure you’ve got enough help and materials to undertake the project… and finally, delivering a job that your client is happy with.
You know how to get it done because you’ve done it before, you have established routines that work for you and your team to deliver the desired result. It’s the same with doing the ‘behind the scenes’ work, the work that clients don’t see, the work that in effect is the engine room of your business.
It’s the work that keeps the money ticking over, what you pay to your providers and creditors, what you pay yourself and your team and what you get from your clients. Unfortunately this is the work that is often put in the ‘later on’ pile and, at worst, is being overlooked or ignored.
The solution to this are routines… habits you set up that, once you’ve established them, you’ll do them as a matter of course, like clockwork. I’m talking about financial administration routines, of course. Let me explain what I mean, and it’s really simple, anyone can follow this advice:
Look at your debtors and creditors on the same day, every week.
Depending on your business type you may have more big jobs or you may have a majority of smaller jobs, which all start and finish at different times. You may source varying amount of materials or contractors that hit the budget at different times. The same goes for your invoice payments.
So the most important thing is that you keep track of what’s going in and out on a regular basis for all the jobs that you have on. To really get a handle on this, the best thing you can do for your business is to schedule a regular time every week to go through your debtors and creditors.
If you have a bookkeeper helping you with your financial administration, schedule a meeting with them to discuss the week’s necessary financial transactions, what’s outstanding and what needs paying. It’s that simple!
This is the time when you delegate or do all your invoicing and actioning of any payments that are due. You could even tell your suppliers that you attend to bill payments once a week, and that is… say a Friday.
It could be any day of the week, really, as long as it’s a regular appointment in your diary, and you stick to it. If you need help with setting up a complete debt collection system including follow up scripts, please visit the Resource Centre at www.adhamilton.com.au.
Check your budget once a month.
You can see where this is going, can’t you?
Yes, the next step is to look at your budget once a month. Again, schedule an appointment in your calendar for at least one hour, once a month, at the beginning or end of the month, whatever suits you best, and turn up! This is a high priority activity in your business, as it can help you correct course in time, if necessary.
There is a great advantage to having a broader perspective and not getting lost in the daily grind. When you look at your last month’s business performance, you can see how your weekly financial meetings will have had an effect.
All the weekly activities of making payments and issuing invoices, or sending out follow up notices, will have produced a result that is plain to see in last month’s data. It will also show up where you need to tighten up your follow up procedures.
Schedule a meeting with your accountant.
When I say the word ‘quarterly’ most of my business clients think ‘BAS time’. The Business Activity Statement (BAS) is used for reporting and paying goods and services tax (GST), pay as you go (PAYG) instalments, PAYG withholding tax and other tax obligations.
So business owners, who have to submit a BAS statements every quarter, have to have their financial house in order. They need to understand how much profit they make and what their tax obligations are. This is where a look at your business’ Profit & Loss report can help you identify further tax minimisation opportunities.
This report requires specialist knowledge to be generated from your current financial data, and the best way to appreciate the information you can gain from it is to have a meeting with your accountant and talk about it. They know what to look for.
These reports are generated in a standard way, looking at all the available financial data you’ve got recorded, and there are certain markers, that can tell a detailed story about your business performance. Knowledge is power, that much is true.
And knowledge about the financial performance of your business is not only power, but it is also a motivator to do better next month. Setting financial goals is only the start of it. There’s a saying that ‘Rome wasn’t built in a day.’ In that sense, I want to encourage you to take more time to work ‘on your business’ than ‘in your business’.
Set up routines! It’s about taking the helicopter view, being a strategist who knows where they’re going, because they’ve surveyed where they’ve been. Keep at establishing working ‘on the business’ routines and try to perfect them… it will kick your business profits out of the park.
Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
Copyright © 2016 Robert Bauman.