When my students first work with me, they think they have their accounting system in place because they have Quickbooks, an Accountant or a CPA.
Yet, this is only part of managing your profitability. It’s important to manage the very systems you put in place to run your business efficiently. Without ways to manage them, you are letting money slip through your fingers.
You also open up your business to a number of liabilities, like defaulting on a loan. When business owners don’t have a systematized way to review their finances, it is usually expressed as a frustration, such as being:
• Confused as to when to hire someone
• Hesitant on when to invest in yourself or your business because you don’t have a cash flow plan
• Undecided in implementing an initiative because you’re already late in invoicing your clients
At Excellerate Success Institute, my clients discover the benefits of having systems in place, resulting in increased profitability. But it’s not enough to set up a system and forget it. I recommend also developing a way to manage those systems.
For example, when a client with a small business missed a tax deadline, it wasn’t only the IRS he had to face. The hardest part was explaining to his employees why their checks were delayed. To remedy future snafus, he set recurring appointments on his calendar to flag when his taxes were due. This way, he had a reminder to manage the critical requirements of his business.
A system doesn’t have to involve machines to work. A simple manual process creates efficiencies and keeps money in your pocket. I used to place receipts everywhere, missing out on tax deductions.
To make things easier for my Accountant, I developed an internal system. At the beginning of the year, we have one expandable folder with expense folders for each month. Each week, I place all of my receipts that have been shoved in my purse, pockets and my car’s coin receptacle, in its folder. Now, my Accountant simply reviews the folders and all of the receipts are accounted for.
The same system can be used for other parts of your business when more than one person needs to handle various parts of the process. This simple procedure works like a charm for my clients, too.
Another new client was missing out on his full business deductions because he didn’t have a way to track mileage. An app, like TripLog for Android or MileTracker for iPhone, makes tracking your mileage easier than ever. Now, he can take full advantage of his business deductions.
Systems thinking is a state of mind. Once you have this state of mind, you’ll close the gaps, create efficiencies, and develop prosperity-based habits. Then, watch as you enjoy maximum profitability for your business.