In my career as a Business Coach and prior to that as an Auditor in the VAT division at SARS (South African Revenue Services) I became aware of one of the most common errors made by business people when they first go out on their own and start a business. What is this you ask? Well put simply it is a lack of mastering the basics that underpin a business.
Any business needs to be built on a sound foundation and this is based on a structure which should be prevalent in all businesses no matter what their size.
What is this structure? Any business is made up of five crucial pillars:
Now the average Joe or Josephine who goes into business is great at the Operations part. The mechanic can fix cars, the electrician can wire houses, the seamstress can make dresses etc. This is all good and well while the business is small and the people they work with are friends and close acquaintances. But then the business starts to grow! Now they are spending all their time being in the business doing those things that make up the operations of the business. The business looks good and starts to grow, less and less time is spent on doing the administration. Invoices are not sent out on time or even worse nobody actually follows up on the payment of the invoices.
Things generally still go well as long as the money still comes in and there is enough to pay the bills and cash flow is healthy. But one day a cheque bounces or a debit order doesn’t go through and the business owner realizes that things are not going well. What looks like a strong business is suddenly on the verge of going under. Not because it isn’t viable but through a lack of sound administration!
Many a good business has failed through this lack of administration. Someone who issues invoices, reconciles payments and follows up on outstanding debtors. Someone who monitors the budget and makes sure that enough money is flowing in to meet the commitments of the business. Without that attention a business can end up folding and the owner losing money.
This scenario is more common than you might think. One of my clients came to a coaching session and said “Michael, business is better than ever! I am sitting on a R400 000 profit mid-year!” My response to him was “Then why haven’t you paid me?” On closer inspection he had most of that profit sitting in uncontrolled debtors.
What is my message to business owners? If you are not in control of the administration in your business you will find many people knocking on your door and demanding payment while you neglect your own debtors. This is not a great situation to be in.
As a small business most of us neglect this aspect because it is not what we are good at and therefore we choose to putting it off and sometimes not doing it. Do this at your peril! There are many solutions to this problem and one of them is to hire someone to do it for you. But I can’t afford that you say! In reply I ask a simple question, can you afford not to? Hiring someone does not mean having a full time worker, it can be a half day employee or someone who comes in only for the hours you need them. If you can’t or don’t want to accommodate someone at your office, why not look at a virtual assistant? Someone who completes the admin tasks you require via electronic means such as e-mail. Using part-time assistants, be they virtual or on-site, means when your business is small they can work fewer hours and as you grow you add more hours.
As a business coach I highly recommend that you have someone dedicated to your administrative needs in the business allowing you to concentrate on the goal of growing your business!