10 Big Things Big Buisnesses Get Wrong
Content
10 BIG THINGS SMALL BUISNESSES GET WRONG
1. Not enough planning Many businesses set up a business plan when they start out - and then forget about it."You need to revisit your business plan pretty regularly in the early stages of your business," Myers says.In the first year, he advises reviewing a business plan after three, six and 12 months. "After that, reviewing your plan every six months helps keep your business on track." 2. Inadequate start-up capital "This usually happens when a new business isn't aware - because the people haven't had advice about all the expenses they will face in the first year," Hartcher says. She lists the purchase of capital equipment, business set-up costs (including legal and accounting fees), insurance, rental bonds and marketing as key first-year expenses. "It's really important in that first year not to be overstretched," Hartcher says. "That's when you are establishing your customer base and if you haven't got the funds available to promote yourself, your growth will be very slow." 3. Confusing profit in the profit and loss statement with cash in the bank "It's important to pay yourself a wage rather than dipping into the business funds," Myers says. "You also need to make a clear division between business and personal expe nses."It becomes very difficult to administer business, personal and deductible expenses when the business owner treats the business money like a piggy bank, he adds - and that can lead to higher accounting fees. 4. Neglecting statutory obligations Myers says that many businesses either don't have a good understanding of regulatory obligations such as GST, Pay As You Go income tax and superannuation, or they don't manage those obligations properly. He says the best way to manage this is to set up a separate bank account for taxes and super."If you're charging GST and a customer pays an invoice, the GST component doesn't belong to the business - that money should be set aside straightaway." 5. Poor cash-flow management "This is one of the main problems most businesses face," Hartcher says. "If you don't project your cash-flow requirements adequately, you can be caught short. It's all about planning ahead and being aware of the risks you might face."Myers says that a simple cash-flow projection spreadsheet updated weekly is usually enough to keep on track. 6. Bad systems documentation It's the old "hit by a bus" scenario, Myers says - you can't afford to rely so heavily on one key person, such as your bookkeeper or warehouse manager, that the business is lost without them. The basic processes for your business - such as how to pay a bill or what steps to take when filling an order should be flow-charted so that someone can come in and pick up the reins if a key worker is unavailable or leaves suddenly. 7. Going after the wrong sale Hartcher points out that a lot of businesses will chase any sale, but it's more important to know what sales to chase. "Sometimes, getting a sale can be bad for your business. You might discount too much or it might cost too much time to get the sale," she says. She advises that a good understanding of your margins - what you need to make a profit - helps a business target the right sales. "Never rely too heavily on one customer," she adds.
8. Poor debtor management You have to train your customers to pay you on time, Myers says. A strict policy means customer payments come through in a predictable rhythm. Hartcher adds that some businesses only chase debtors when faced with a cash-flow crisis, and by that time many debts have blown out and may take some time to be resolved. 9. Not controlling the cost of finance "A lot of businesses have no idea how much their finance is costing them - and it can add up to really substantial amounts," Myers says. Bad negotiations on lease terms, using credit cards to manage cash flow and not shopping around to get good rates on business loans can substantially reduce profits, he warns. 10. Overstocking "Tying too much capital up in stock is costly," Myers says. He advises strict stock management and selective purchasing. Good record keeping and understanding your business will keep you on top of your stock requirements, Hartcher says.
Aayushi Dahiya 10G
1. Not enough planning Many businesses set up a business plan when they start out - and then forget about it."You need to revisit your business plan pretty regularly in the early stages of your business," Myers says.In the first year, he advises reviewing a business plan after three, six and 12 months. "After that, reviewing your plan every six months helps keep your business on track." 2. Inadequate start-up capital "This usually happens when a new business isn't aware - because the people haven't had advice about all the expenses they will face in the first year," Hartcher says. She lists the purchase of capital equipment, business set-up costs (including legal and accounting fees), insurance, rental bonds and marketing as key first-year expenses. "It's really important in that first year not to be overstretched," Hartcher says. "That's when you are establishing your customer base and if you haven't got the funds available to promote yourself, your growth will be very slow." 3. Confusing profit in the profit and loss statement with cash in the bank "It's important to pay yourself a wage rather than dipping into the business funds," Myers says. "You also need to make a clear division between business and personal expe nses."It becomes very difficult to administer business, personal and deductible expenses when the business owner treats the business money like a piggy bank, he adds - and that can lead to higher accounting fees. 4. Neglecting statutory obligations Myers says that many businesses either don't have a good understanding of regulatory obligations such as GST, Pay As You Go income tax and superannuation, or they don't manage those obligations properly. He says the best way to manage this is to set up a separate bank account for taxes and super."If you're charging GST and a customer pays an invoice, the GST component doesn't belong to the business - that money should be set aside straightaway." 5. Poor cash-flow management "This is one of the main problems most businesses face," Hartcher says. "If you don't project your cash-flow requirements adequately, you can be caught short. It's all about planning ahead and being aware of the risks you might face."Myers says that a simple cash-flow projection spreadsheet updated weekly is usually enough to keep on track. 6. Bad systems documentation It's the old "hit by a bus" scenario, Myers says - you can't afford to rely so heavily on one key person, such as your bookkeeper or warehouse manager, that the business is lost without them. The basic processes for your business - such as how to pay a bill or what steps to take when filling an order should be flow-charted so that someone can come in and pick up the reins if a key worker is unavailable or leaves suddenly. 7. Going after the wrong sale Hartcher points out that a lot of businesses will chase any sale, but it's more important to know what sales to chase. "Sometimes, getting a sale can be bad for your business. You might discount too much or it might cost too much time to get the sale," she says. She advises that a good understanding of your margins - what you need to make a profit - helps a business target the right sales. "Never rely too heavily on one customer," she adds.
8. Poor debtor management You have to train your customers to pay you on time, Myers says. A strict policy means customer payments come through in a predictable rhythm. Hartcher adds that some businesses only chase debtors when faced with a cash-flow crisis, and by that time many debts have blown out and may take some time to be resolved. 9. Not controlling the cost of finance "A lot of businesses have no idea how much their finance is costing them - and it can add up to really substantial amounts," Myers says. Bad negotiations on lease terms, using credit cards to manage cash flow and not shopping around to get good rates on business loans can substantially reduce profits, he warns. 10. Overstocking "Tying too much capital up in stock is costly," Myers says. He advises strict stock management and selective purchasing. Good record keeping and understanding your business will keep you on top of your stock requirements, Hartcher says.
Aayushi Dahiya 10G
