Always be optimistic, even when things aren’t going well (part 2)

Get into the habit of doing monthly accounts
I, and many people like me, find doing accounts boring and tend to leave them till the last possible moment. They inevitably slip down the priority list and, as a consequence, end up taking more time and causing more hassle than if they had been dealt with in the same way that other aspects of the business are dealt with.

I have seen people in business – indeed, I did it myself at the beginning – arriving into their accountants’ to do their accounts with large black plastic sacks full of invoices, credit notes, delivery notes, cheque-book stubs, bank statements and unopened envelopes containing who-knows-what. This is not good.

Even the smallest business needs to know how it’s doing. If doing your own books is not your cup of tea (not having time to do them is not an excuse – with proper organisation, anything is possible) or you’re just not prepared to do them, then you should arrange to get a bookkeeper to set everything up before you start. Bookkeepers are a grade down from accountants and so usually charge less than a full-blown accounting firm would. You may need an accountant to sign off on your annual accounts, but your bookkeeper can prepare everything for him or her.

Being disciplined about preparing monthly accounts forces you to get your paperwork into a decent shape every few weeks, means that you are less likely to be stuck with penalties for late PAYE and VAT returns and, most importantly, enables you to measure the financial performance of the enterprise so that you really know what’s going on and can take remedial action as appropriate.

Understand/monitor the different areas of your business

As we have discussed already, we all have a natural tendency to concentrate on the things that interest us. Keeping a check on the main area of your business every month or so, perhaps at the same time as you review your monthly management accounts, is a great idea. Here are some other areas to consider:
l Finance: Monthly management accounts, cash flow, creditor days, PAYE and VAT payments or refunds due, relationships with accounting staff (creditor days are the number of days on average it takes your customers to pay you; 45 days or less is good in a business which gives credit).

l Human resources: Increase or decrease staff levels, holiday planning, disciplinary issues, staff meetings, incentive programmes, salary reviews, appraisals. l Marketing and sales promotions: Planning promotions, looking after existing customers, measuring the effectiveness of campaigns, PR activity, relationships with sales staff.

l Production: Review of processes, relationships with production staff, wastage reports, stocktaking, production-area cleanliness, health and safety, purchasing.

l Research and development: New-product development programme, pricing to achieve margin, existing product development, competition monitoring, visiting trade shows, reading trade press.

Keep control of costs
Nothing ever seems to cost what it was envisaged it would at start-up. Capital costs have a habit of spiralling upwards, and operating costs take an age to settle down to a predictable level. This all comes back to making sure you control your business, and not the other way around. If you don’t know how you’re doing, it’s very hard to do anything about it. I make no apology for harping on about the need for an owner/operator to get management accounts done and know their sales and margins. In short, don’t be a busy fool.

Next week: Always be optimistic – continued

n Taken from Making Bread – The Real Way To Start Up and Stay Up in Business by Brody Sweeney, published by Liberties Press – buy at www.libertiespress.com and get a 10 per cent discount