Move your business forward
The start of the new year is a good time for business owners to undertake a review of their business and to begin making resolutions to get the business moving forward in 2007. These are some of the strategies that owners should consider adopting all year round:
Develop a business plan
Developing a business plan that supports a vision of where the business is heading and how it gets there is an important management tool. All business decisions can then be made within the context of the plan to ensure that resources aren’t wasted on areas that don’t add to the overall direction of the business.
This plan should be updated on a regular basis so that it reflects the changes that are going on in the business.
Project cash flow
It is important to project cash flow on a monthly basis, for at least the ensuing 12 months and regularly updating these forecasts. This will provide early warning signs of any potential cash shortages, ensuring early corrective action can be taken.
At the same time, the business should review its credit control procedures to ensure that debts are collected on time.
Manage the compliance obligations
When planning for growth, business owners need to be aware of the impact that it has on their reporting and payment requirements to the ATO as well as the additional taxes that may be payable when certain thresholds are reached. Examples of these responsibilities include; shorter time frames for payments of income tax and remittance of PAYG, audit requirements, payroll tax, and occupational health and safety issues.
Systemise the business
Having good systems in place will make the business more efficient and will also improve the operating performance of the business. Good systems ensure that the business consistently produces high quality products or services, regardless of the staff member involved. These systems should evolve as the business grows.
Systemising the business can also provide a competitive advantage. Customers that buy from your competitors and who are tired of inconsistent quality will soon buy from you. Then all businesses need to do is communicate this point of difference to your customers and prospects and explain how your new processes will serve them better.
Review email files and back up computer data
A thorough review should be made of all email folders, including deleting all spam and junk emails and archiving some folders. Its important that regular backups are made of all data, including customer information, stock lists, and business records to ensure the business is able to operate in the event that this information is lost.
Good staff are the lifeblood of most businesses. Owners should have policies and procedures in place that deal with the hiring, training and monitoring of staff. This process can be managed by someone within the business or through an external consultant.
The business should also provide remuneration incentives (e.g. bonuses) to reward staff for achieving specific performance targets.
Improve staff communication
Small businesses are often poor communicators with information known only to the owners and senior management. Owners should consider making all staff aware of the goals and strategic direction of the business as well as ethical positions and new initiatives. All staff should also have some input in the business plan.
A policy of good staff communication encourages a feeling of working together and often results in better decision making because of the free flow of information.
Review financing options
There are many different financing alternatives available today. Businesses need to utilise the type of finance that best suits their requirements as well as regularly reviewing and comparing their financing to ensure that the current provider remains competitive.
For example a bank overdraft may not be the most efficient and cost effective way to fund debtors and stock purchases. Other options include debtor finance and rolling bill lines.
Regular financial reporting
Financial reporting is the cornerstone of any business. Timely knowledge of business performance allows decisions to be made from an informed position with monthly comparisons to budget and exception reporting ensuring that problems are identified quickly.
As a minimum the business should produce monthly profit and loss statements, accounts receivable and inventory reports.
Outsource non-core tasks
Business owners often make the mistake of trying to reduce costs by doing many tasks themselves instead of assigning these tasks to more experienced persons.
For example the owner may decide to have the Business Activity Statements prepared in-house by inexperienced staff instead of by the accountant or a qualified bookkeeper. This often ends up costing the business much more in the long run when the accountant is called in to correct the mistakes.
Owners should consider outsourcing functions such as compliance, staff training, bookkeeping and accounting and instead focus more time working on their core business.
About the Author
Joe Kaleb is a Chartered Accountant and CEO of www.australianbiz.com.au, a dynamic website that provides up-to-date tax information, management tools and other services to assist business owners to better manage their business and income tax obligations.