Every small business owner will agree that it’s easy to get bogged down in the day to day processes and problems involved in keeping a business going, and forget the bigger picture! It is hard to find the time, or even to know how to start to manage the business at a higher level, to ensure long term success and growth. As hard as it may seem good business management is essential and all business owners should give it the priority it deserves.

Firstly, what is business management? Regardless of whether your business is selling a product or providing a service, there are a few basic areas within your business that need to be understood, reviewed and maintained to ensure everything is running as well as it should. In short, you need to adopt a good business management system that will help you to regularly review and improve the business processes, establish meaningful budgets and maintain good cashflow. Let’s take a look at each of these areas.

System

A business management system is basically a toolkit that provides business owners with the framework to monitor, plan and control the activities and measure the performance of their business. It requires business owners to take a step back from the day to day functions and take an in-depth look at all the parts of their business that contribute to the end product. A good business management system can analyse how a company uses its resources, what processes are in place and how efficiently they are working, monitor income and expenses and provide a wealth of valuable information that is needed to make informed business decisions.

Systems and processes should never be just set and forget, they need to evolve over the life of the business. Taking advantage of improvements in equipment, training staff, trends in your industry, reviewing the financial structure can all have a significant impact on the overall profitability of the business.

Process

In any industry, business processes follow the same pattern of design, implement, monitor and optimise. As a business, it is important to take a step back and review all of the processes involved in delivering the finished product.

Process design is the first step, to identify and create a set of rules and procedures. Once the rules and procedures are documented, implementation is the next step, so all team members are working consistently and efficiently. As part of the business management process, there needs to be ongoing monitoring to track performance, to provide feedback and to optimise procedures to ensure efficiency and productivity are maintained.

Not having appropriate processes and systems in place can lead to confusion, result in time wasted, more errors, and demoralised employees. Therefore, ongoing implementation, review and improvement of business processes form a core part of any successful business.

Budget

Every business needs a budget. A budget should outline the estimated business revenue and expenses over a specific period of time, this can be broken down as monthly, quarterly or yearly. It provides a detailed picture of the financial resources coming in and going out of the business.

The budget can also factor in the business goals, either to expand into a new area or aim for growth of a certain percentage. It is important to be realistic with your budget projections and be conservative. Some items to include in a business budget are:

• Fixed and variable income and costs
• Potential changes to the market, customers and competition
• Growth and expansion plans
• Any foreseeable issues or problems
• Major acquisitions or spending

Once you have set the budget it needs to be regularly monitored and updated with the actual figures for each period. This helps you to identify discrepancies, improve accuracy of forecasts and drive important business decisions, such as whether to increase advertising, cut expenses, employ more staff, purchase equipment etc.

Having a business budget allows you to create a focus for the direction of your business and provides targets that will help your business grow. It also allows you to stand back and review the business performance and the factors affecting your business, to identify areas of improvement, anticipate problems, improve clarity and provide you with a greater confidence in decision making.

Cash-flow

There is an age-old saying in business, Cash is King. Whether your business is just starting out, established and growing or struggling, managing cash-flow effectively is absolutely essential, for many it’s the key to business survival.

We often see businesses that are trading profitability but have just run out of cash, we need to remember that good profit does not equal good cash-flow. Effective cash-flow requires a detailed focus on all areas driving the cash resources, in addition to your profit or loss.

Control and measure

• How much cash do you need? Understand how much working capital you need to hold.
• What are you owed? How many invoices are overdue, review payment terms?
• How much cash is tied up in unbilled work?
• How much do you owe? How long do you have to pay suppliers for materials/services?

How we can help!

As accountants and business advisors we are able to help our clients to focus on each of these important areas of their business and build the framework they need to succeed. Whatever stage your business is in, make sure you make time for good business management to take advantage of all expansion and growth opportunities. Contact us to book a suitable time to discuss your requirements.