The best time is now!
You’ll be hard put to find a news site today that doesn’t have a bad forecast for the global economy. There’s plenty of talk about with Brexit, and the US/China trade war. Even locally we read that the majority of people in our lovely lands are inexorably falling behind economically. “The decline of the middle classes.” Indeed we probably all know people who are struggling right now, trying to keep up, trying to live within tight financial constraints.
The result is businesses are struggling too, with a down-turn in confidence impacting everyone’s spending decisions.
Using an analogy of an old sailing ship, as captain or first officer you might have had most fun hoisting all the canvas to sail as fast as you can, or dropping anchor in an idyllic harbour for a bit of R&R. But with a bad forecast, to minimise the impact of whatever is coming, to weather the storm, you need to trim the ship and stay on deck.
As a business owner or manager, the response has to be the same when there’s a bad forecast. And with there being little doubt the current economic forecast is bad, now is the time to really focus on business management.
The trouble is, for many people in business, “management” isn’t something that comes naturally. Many businesses are started by people with professional qualifications and acquired skills. Their preference is to design or create, sell, advise, or plan, or manage. Managing the cash and financial performance of the business isn’t their thing. They might even take money management for granted, “Having the recommended accounting software will help me keep doing what I love”.
Or maybe they rely on others to do the counting.
At the best of times, that’s risky. And with a bad economic forecast, it could be irresponsible.
So to weather the storm, put in place some basic business management practices. And put aside time every week for a personal update on each of them.
Number one is cashflow.
Your cash flow is crucial. Cash is king, right? Start a cash flow forecast today and use it to look ahead at least a year. Use it to help you make every decision. Use it to model events you hope will never happen. What if the server needs replacing. What if we need to hire more staff. What if we have to put some staff on reduced hours. How could we save costs some other way? What if. What if. What if.
Staying on top of your cash flow. Modelling “what ifs” will mean nothing should take you by surprise. Looking ahead mightn’t result in “easy come”. But without a cash flow forecast, one day you might wake up and wonder “where did it go”. And nobody wants that.
The second thing is time management.
That doesn’t mean timesheets for the sake of timesheets. It means planning time ahead and then recording actual time – so you can better plan the next bit of time ahead and better complete work within the planned time. In any white-collar professional services firm, there’s no stock to manage. Revenue and profit comes from applying time and expertise. Without measurement and management of the time consumed as the expertise is applied, Parkinsons Law prevails.
The third thing is invoicing.
Who hates invoicing? Tough luck! Get your invoices out ASAP.
We all come to work to make money. Without invoices going out and money coming in, your cash flow will suffer. Get the money that your business has earned into your bank ASAP. Like many other aspects of money management in business, invoicing is sometimes perceived as a chore. Therefore it becomes a chore. If it’s really that hard then review your systems. Talk to us. We’d love to help.
One of our new Abtrac clients set a goal of getting most invoices out the door within 5 days of month end. Previously they were sending them out in the 3rd and 4th week of the month. The result was they erased a $250,000 overdraft within 3 months.
Get more out of the systems you have.
Find out exactly what they can do. Most business systems are seriously under-utilised. One or two people know what they can do for their specific roles while other aspects of the same system are never used and at times not even known about.
Worse than that, often someone whom you trust suggests you replace your systems. It’s easy to wax eloquent about some other package and sound knowledgeable. But at the end of the day, replacing your current system could be a fruitless exercise, because the new system is no better. Maybe the old system could have done what the new one does, and done it better.
Don’t get sucked into feigning progress, wasting your time, and lining other peoples’ pockets at your expense.
Remember, it's your business.
However, there could be a genuine reason to change systems or introduce new ones. In which case as above, don’t rely on anyone else to tell you what you need. How on earth could they know the intricacies of your business. Even if they know ‘other businesses just like yours’ consider how long it would take to train someone into any senior role in your business, with its own unique mix of personalities, skills, clients and market.
There’s no such thing as a quick fix, nor a silver bullet. So even if you do hire a third party consultant or delegate someone within your company to do the work, the decisions regarding the systems your business will rely on must be yours and yours alone. That means you need to put some honest time into the decision making process. And do a good job of it, treating everyone else’s advice with a healthy bit of scepticism be they enthusiasts for immediate change or obstructive sticks in the mud.
Whether the economic conditions that unfold negatively impact your business or not, attention to the above five aspects of business management will have a huge positive effect on your business.
We know of excellent cash flow systems. And we write and market an excellent time recording, work planning and invoicing system. Indeed Abtrac itself will give you a revenue forecast and a resource planning forecast.
And I’d venture to say we also know more about a lot of the popular accounting systems than many accountants.
So if you want any advice on any of the above please call or email us. We will be very pleased to respond.