“To be in hell is to drift; to be in heaven is to steer.”
-George Bernard Shaw
“Out of clutter, find simplicity.”
– Albert Einstein
There is no better feeling than being organised. To collate your thoughts, ideas, records, documents etc. can provide true clarity and peace of mind. You have complete knowledge of what is going on in your business (as well as your personal life). The probability of some type of nasty surprise is drastically reduced.
My two highest priorities in managing my own business are flexibility and control. Flexibility in the sense that you are not being dictated to – you have a say in your own financial (and lifestyle) destiny. Control in the sense that you can make informed decisions based upon all available knowledge, to suit your own situation. Knowledge via financial reporting provides power, and thus allows you to maintain control. Cloud based accounting packages such as Xero provide sophisticated level of reporting, with the least possible investment in your time and software costs. So compared to 10 years ago, there is no reason for not being up to date!
Sound record keeping is the foundation of the management information system in your business. It helps facilitate data which can be analysed, allow you to understand exactly what is happening, and appreciate why it is happening. If you are making decisions which aren’t delivering good outcomes, then the numbers should tell you that you need, to make changes. Recently I worked with a business with the worst reporting system I’ve ever seen! The problem was that they understood some very basic bookkeeping skills, but didn’t feel the need to seek any professional guidance along the way. Accordingly the information they generated was totally misleading, meaning the amounts of BAS refunds, income tax, PAYG and staff super were not correct. Which lead to inquiries from the various government bodies due to the inconsistencies in their reporting. Not only were they having to spend additional time in responding to queries, but they were making business decisions without any real direction.
My top five tips:
· Have a system to file current records as well as archived information. Preferably soft copy.
· Collate very important documents in one place (e.g. contracts, leases, bank records etc.)
· Track transactions through the one main bank account – one account per business. Keep the transactions separate.
· Know who you owe money to, who owes money to you and how much stock you have on the shelves at any time. Always!
· Compare and review reports on a regular basis each month. Do they look right? Don’t just assume the POS system “has a glitch”. If there is a problem, get it fixed! Look at gross margins, POS for total sales by category, sales mix etc. every month.