There's more to running a fantastic practice than being a fantastic adviser. Financial planner and small business owner Rob Goudie offers four crucial tips to keeping your practice in the black:
As a small-business owner who has advised other small-business owners over the last 15 years, I've seen many issues that have pushed businesses to the brink of bankruptcy. Below is my list of four critically important areas that we need to get right to avoid that happening.
Of course, this list could be expanded out to five, 10 or 20 quite easily, but get these right and you will have the opportunity to consider the others down the track.
I've no doubt you’re great at what you do, but if you’re not churning out the invoices and making sure you get paid on time, all your hard work can be done in vain. Debtors have the potential to break your business. Without constant cash flow to cover overheads and pay your way, unpaid work will eventually be your business’s undoing.
Have you ever hired a tradesman to do a job – a great person, reliable, trustworthy and fantastic at what they do – but who takes between three months and two years to finally send you an invoice for payment? I've seen this happen many times, including with some of my clients. A mechanic client of mine was so slow with sending out the invoices while all his other bills kept rolling in. My advice to him was to make sure there was an invoice on the passenger seat of every car at the completion of each job. I believe prompt invoicing is a sign of efficiency and also an expectation – that we've completed a job efficiently and on time and that we now need to be paid for it.
As businesses grow the need to delegate becomes very important. But it’s essential not to lose sight of the jobs in your business that can dictate its future.
I recently watched a very successful retail business owner lose touch with his business. Within six months his stock levels increased to $2 million and well over his average of $1 million. This put his business under immense cash-flow pressure as the stock on hand was considered seasonal specific and he was commencing his slowest part of the retail year – winter. These errors can arise quickly and send businesses broke.
Delegating is an important skill to learn, but make sure that when you do, you’re not delegating business-critical roles.
Ignoring the most profitable aspect of a business:
As a soloist, it’s hard not to get distracted from the parts of your business that you do best. More often than not the part of your business that allowed you to break out on your own is the area that you specialise in and also the most profitable. Getting distracted from your specialised niche to focus on other fringe services or products can take away precious time and dollars from your bottom line. These days, people want to deal with and are prepared to pay top dollar for specialists in the area that they need help. Don't lose focus.
Make sure you take the time to understand the finance side of your business. Do you receive monthly profit-loss and cash-flow reports so you can keep a close eye on the progress of the business?
Receiving these reports on a monthly basis allows you to keep on top of the business’s progress or lack thereof. If the reports are not reading quite as you'd like it gives you the opportunity to react quickly and make the changes to get things back on track.
If business is travelling well, receiving your reports can be an exciting time of the month. Just remember to watch your cash flow: with profitability comes tax liabilities. For self-employed people there is the quarterly “Pay as you go” liability as well as superannuation.
This blog originally appeared on flyingsolo.com.au - Australia's micro business community.