Six ways to stay on top of business basics
It’s a concept which was drilled into you during your school days: do the basics well and everything else will follow.
So what are the business basics you need to master?
If you’re new in business, it’s imperative for you to get the basics right.
Even if you’ve been in business for a while, it’s useful to refresh your understanding every so often.
Start by surrounding yourself with good mentors. You need to develop a good relationship with your accountant and tell them you are keen to learn as much as you can when it comes to the accounting, bookkeeping and tax side of your business.
If you don’t think your request to learn more about business basics are going to be met with great enthusiasm, maybe it’s time to change accountants and make a fresh start.
As an accountant, I have always taken the time to explain the business basics, and why things are treated in a particular way by the ATO.
I believe there is some work my firm does for clients that they could do themselves with a little guidance and training. Some jump at the opportunity to be more involved, and some are not interested.
If clients that choose to do more work for themselves, they may end up coming to you at other times of the year requesting more specialised and tailored advice. They may spend the same amount of money but feel so much more empowered and in control.
So what are the business basics that you (or your client) need to master?
Six business basics:
Are you clear on what your goals are? Prepare a list of what you want and what you don’t want from your business. To me they are equally important and will certainly help you design your business model and your boundaries.
Remember your business goals don’t have to just be about money.
Do you have one? Prepare a list of all the costs of operating your business. Once you know what your costs are, you will be able to see what sort of sales targets you need to hit to break even.
You’ll also be able to work out if your current pricing is sufficient to cover your costs and adequately remunerate you for your time and effort.
3. Record keeping
The options are many but can be broken into two main categories – manual or digital. The critical thing here is that you have a system that works for you and that you stick to it.
Do some research, talk to friends and business colleagues and find out what works for them and even talk to your accountant to see what they suggest.
Bookkeeping is how you collate and summarise your receipts and income. Once collated, you can prepare a Profit & Loss Statement to see if you are making a profit or loss. Ideally you should be doing this each month and not wait until the end of the year when you have your tax done.
In the early years you may choose to use a manual cashbook or a spreadsheet and then move onto cloud-based accounting software. There are many different options depending on your needs and your budget and I would definitely recommend that you explore this option from day one as you might be surprised at how affordable and efficient moving to the cloud is.
5. The numbers
Do you monitor your numbers daily, weekly or monthly? If you look at your profit figure each month you might be happy or you might be gravely disappointed. Either way you have something to aim for the next month.
You can either try to replicate what you did in the previous month to get the same result or re-tweak things to improve on the previous result.
As a SME owner it’s probably not in your budget to have an accountant involved in this process each month, but you can set up a summary sheet or a spreadsheet to summarise your cashbook or if you are using accounting software, you can generate this report with a few clicks of your mouse.
Are you looking after yourself?
I can’t stress how important it is to look after yourself if you want your business to be successful and sustainable into the future. If you are not being the best version of yourself, your business and the people around you will ultimately be affected.