Too many businesses fail because the owner has not established efficient business systems. The business owner is so caught up running the business that good business management gets forgotten. Often the owner puts tedious administrative tasks like bookkeeping on the back burner.
The symptoms are familiar, and their results are disastrous:
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- Poor or non-existent record-keeping
- Unpaid tax obligations
- Invoices go out late and debts remain uncollected
- There is one cash-flow crisis after another
- Incorrectly costed and priced goods and services
Any of these factors can cause a business to fail, but all are avoidable. The whole point about designing effective systems is that they free you to spend more time working on your business.
- To run a business, you must be business-like. Being capable does not guarantee business success. The common cry: “I’m far too busy” is also 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, attempt to become well-rounded rather than a specialist. You can offer outstanding goods or services, but if you don’t develop good business systems, your business will be in danger of failing.
- Remember that other stakeholders in your business, such as your suppliers and bankers, are always assessing your business skills. If you pay people late or can’t meet the terms of your debt agreements, they will draw the obvious conclusions about your business skills.
- 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 because you have developed clear operating and procedures manuals. The business is a viable unit and less dependent on you.
For example, think about why franchises are so successful: it’s because people can buy a proven system and operate it after minimal training. The new owners can do this because they use business procedures that are written out in simple, clear operating manuals.
Here are five steps to a better business systems:
1. Good record-keeping and bookkeeping will help you keep on-side with the Canada Revenue Agency. If you’re able to pay your taxes 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. A sudden tax demand out of the blue won’t catch you because no such thing exists in a well-run business. Always know which taxes are due and when, and you’ll suffer less stress.
2. 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’re going?
3. Good cash-flow forecasting will enable you to plan for unexpected cash-flow problems and take steps before the problem becomes a crisis. Banks will respect you if you anticipate problems and make plans. Approaching banks with a plan before a crisis will show them you’re in charge of your business.
4. Good creditor and debtor control will improve your cash flow. Invoicing 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 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. For example, if you let costs get out of hand 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 get someone else to do it for you. You should understand the processes and 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. Good business systems will enable you to work smarter, not harder. Training others to follow documented systems and procedures will help you avoid burnout and let you take time off work. Systems are the way to build a better business and liberate yourself from it.
