What Do I Have to Manage? # 3 – The Basics.

Saturday, April 24th, 2010

 EMPLOYING THE RIGHT PEOPLE TO MAINTAIN THE RECORDS.

In this instance, I am referring to employing suitably qualified and experienced people to maintain the financial records of the business on a daily basis. 

Far too often, I come across someone in the accounts department of a business, who has some form of general office experience but is not a trained bookkeeper or accountant.  This has happened largely due to the fact that the owner of the business was trying to keep costs down and has the attitude that since bookkeeping seems such a simple task, why bother with someone too ‘high-powered.’ (And consequently expensive!)

This attitude has been exacerbated by the prevalence of easy-to-use accounting software, which allows just about anyone with an atom of intelligence to capture data, – and the plethora of basic “bookkeeping” courses available from a variety of “training” institutions – which give people permission to call themselves bookkeepers when they are not! 

We don’t need data capturers – we need people who can extract information from this data ocean and use it to make vital decisions. 

As resellers of the very popular Quickbooks accounting systems, we often come up against people who have purchased the software and think that it makes them accountants! Wrong! Don’t underestimate the importance of accurate reporting.  One of the most mistakes that business owners make is to go out and buy this kind of software (and you can buy this off the shelf at a number of the mass market stores), and then because it seems so simple, they have a go at setting it up themselves.  There’s no problem with that, provided, you as the business owner, understand something about accounting, and also have an idea of what you want to extract from the data that is going to be captured.  Like most things in life, if you do the basics – the foundations – well, then it’s likely the rest of the job will stand up to anything.  If a house is built on shaky foundations it will eventually fall.

This is very dangerous!  And – it can prove to be extremely costly in the longer term, when someone qualified has to be brought in to fix things up!

The difference in cost between employing an excellent person and a mediocre one will be more than made up by the value created by the former, and in a very short time. Remember, – the other side of the coin is this – if you pay peanuts, you’ll likely get monkeys!

When specific skills are required for specific non-frequent tasks, outsource them. Even if the cost is quite high, it will be far more effective than if you tried to do the job yourself – and it’s a one-off cost too!

Now, – even though I’ve said that its important to employ the right people (and I must emphasise this), the advent of new technology and the Internet means that outsourcing this kind of expertise has never been easier.  For example, we can help clients – anywhere in the English-speaking world – by logging into their computers using the internet, and checking the work done by a small business-owner’s employees. (if you want to know more about this, check it out on our website.  It’s relatively inexpensive and all you need at your end is an internet account and an ADSL broadband line.)

Whatever you do, make sure that the information is reliable, regular, up-to-date and accurate.

INSTALL SIMPLE BUT EFFICIENT SYSTEMS OF INTERNAL CONTROL.

Accountants are notoriously pedantic when it comes to installing systems of internal control.  Don’t get me wrong – the systems they install WILL work. The problem with them is that they’re often designed for Accountants and as a result they’re often not simple for the average small business owner. 

And quite often, they haven’t been sufficiently customised to the needs of the business.

In a small business environment, it won’t be long before people start taking short cuts to make their lives easier. (including the Boss!).

Systems of internal control should be designed to achieve two main purposes

  • to enable the flow of funds in and out of the business to be properly managed relative to the skills of the people using the system, – and
  • to cater to the leadership style of the particular business owner.  Some leaders love detail, and others don’t!

I have come across administrative systems that are so complex they dictate to the enterprise what needs to be done.  Systems are there to manage what you tell them to, and not the other way around. 

The system should be able to accurately record all transactions and enable the handling of all queries in the quickest possible time.  The use of paper should be kept to a minimum.  Developments in modern technology make this eminently possible.

At FINSERV we specialise in setting up such systems – they’re relatively inexpensive, and they work!

USE A COMPUTER.

It is surprising how many small business owners still avoid the use of a computer to assist in the management of their businesses.  Many of them still see it as being a modern accounting machine, to be used only by accountants and bookkeepers.  They have no idea that for the sake of an hour or two in front of the computer each day, they will be able to keep on top of the daily performance of every aspect of their businesses.

In an article written by Michael Plumstead for SUCCEED magazine he said this:

“Identify which daily or monthly tasks are critical to your very survival and then start talking to everybody you can find about the right technology to cover those important areas of your business… Start small and grow slowly.  If the technology saves you time, saves you money and enables you personally to work more efficiently, then buy it and learn to use it.  Do not over-learn…Technology is a means to an end – to grow and manage your business. It must not be used to plug weaknesses in your personal skills. Use it thoughtfully to improve your strengths and either to save you money or to increase your income.” (emphasis – mine!)

Today’s computers are cheap, efficient and provide a host of management tools to free up enormous amounts of a busy entrepreneur’s time.  Apart from financial record keeping, they provide Daily Planners, electronic banking, access to the wealth of data available on the world wide web, calculators, data storage & sorting facilities and a host of other features.  Modern software has also eliminated the need to be able to type quickly as programmes exist which enable voice-activated data capture.  Letters can be typed by just talking to your computer.

Most importantly, they have enabled modern business owners to analyse the performance of their businesses in a matter of minutes – a task that forty years ago would have taken hours and even days by a highly qualified accountant.

In this high-tech information era in which we live, we need as much (meaningful) information as we can get, to stay ahead of the pack in our enterprises. The comment “I’m old-fashioned about computers!” won’t wash with me any more.  And if you really feel strongly about not using one, then at least employ someone who will!  Either way, you can’t afford to be without one!