Help is at hand …

More than thirty years ago, when I opened the doors to my first business – it was actually a side door which lead to an office located above a carpet shop in a less salubrious part of town – my initial accounting records were incredibly meticulous. To give you some idea, (though I cringe at the very thought today), I remember recording, by hand, how long it took for various credit card companies to deduct their direct debit payments from my company bank account.

Such time-consuming activity was, perhaps, understandable. I was a novice entrepreneur and had spent the previous five years working as an accountant. Nevertheless, considering I only used the credit cards to buy petrol or the occasional item of stationery, it was a little OTT.

It took a business colleague to explain that while watching cash flow was important, there was little need for the type of detailed analysis that would impress the IMF. “Besides,” he scolded, “you should be out getting new clients”.

It was solid advice because being a fastidious accountant is not enough to turn you into a competent business person, although recognising how effective you are when undertaking various tasks within your business most certainly is. The objective of any business is to make money, which means its principal (or, in those early days, only) employee should not waste time poring over credit card records to save a few quid in interest.

Furthermore, while anyone who starts their own business acknowledges the absolute need to have sufficient energy in order to ensure that things get done, this should not be confused with wasting time being a busy fool. Being mindful of one’s limitations (and cost effectiveness) is a remarkably useful characteristic for the budding entrepreneur to nurture.

Admittedly, there are tasks it’s impossible to avoid: you can answer the phone; you do have ideas relating to marketing; you can file papers away in a filing cabinet, but is any of this helping to make your business money? Probably not.

It follows that taking the decision to invest in staff and support services which free the business owner to concentrate upon what it is that he or she is most accomplished will pay dividends.

Of course, this is easier said than done, but while finances might be tight for small firms, it’s important to note the bigger picture: to lay the foundations of a profitable business that will hopefully be around in several decades’ time.

It’s entirely understandable that many small business owners concentrate on the day-to-day running of their firm, an essential part of effective business performance, and just ‘keep an eye’ on the bank account, ensuring that the business is operating within agreed overdraft limits or enjoys a credit balance. However, there will come a point at which the owner will almost certainly want to expand, recruit staff or buy stock in greater quantities to benefit from larger discounts and it’s at this juncture that what might be called the company’s ‘basic numbers’ become crucial.

These basics: turnover, expenses and overheads, are pivotal when determining how successful a company is; in addition, other essentials, such as profits and inventory costs, are also important in calculating whether a company can afford to expand. If the firm wants to borrow money with which to finance its expansion, lenders will require considerably more detail than a bank account statement showing a credit balance.

The basics will need to be supplemented with details of regular company spending, current and future tax liabilities, the firm’s accounts receivables and a host of other financial information. This list is not intended to deter or horrify the existing or budding entrepreneur, but to advise him or her that help is at hand.

Unlike the late 1980s, nowadays, accounting software can simplify the collation of ‘basic numbers’ – and then some – as it enables the business owner to track records and transactions; there’s no need to rummage through boxes of receipts or over-analyse credit card statements.

Moreover, automating the accounting function is not only surprisingly inexpensive, it also removes the likelihood of paperwork getting lost or misplaced and allows business owners to check on payments from customers, or upon details of bills they need to settle. In the case of the highly respected Quickbooks accounting software, used by Isle of Man SME accountancy specialists Sterling Business Solutions, users can receive an immediate bank reconciliation in a single click of a mouse, or download details of transactions going back years.

“The business clients to whom we’ve introduced Quickbooks software have been absolutely delighted with its functionality,” says Sterling Business Solutions managing director David Johnson. “At a stroke, invoicing, payroll and other, previously complicated accounting functions, become less of a chore for the business owner, while the reports the software can produce has proved invaluable to firms.

“We consider it an essential support function for business – a cost-effective administrator. On top of this, Sterling Business Solutions has years of experience when it comes to advising firms on a host of financial matters of which company directors need to be aware, such as extracting profits from the business, or when – and how – to take dividends, salaries and loans. This is a function beyond any software because it’s based upon real-life experience, but business owners who get the basics right by making the software work for them are soon talking about expansion and growth rather than labouring on unnecessary administrative tasks.”

Presumably such as checking credit card statements into the wee small hours….