Business fundamentals include reliable cashflow, tax planning and effective systems. These are instrumental for getting through the tough times, but even more importantly, for being ready to capitalise on opportunities when they come.
Here we overview the business fundamentals you need to have in place …
There’s no doubt about it, current business conditions are tough. The effects of inflation, supply chain issues and ongoing disruption from staff illness or an inability to recruit, is a lot to deal with.
Tough business conditions are wide reaching, and affect your suppliers and customers as well.
In our experience, it’s the businesses that stick to the fundamentals that are the best placed to weather the tough times and rebound quickly when things improve.
Here are five business fundamentals, successful business owners constantly work on:
#1: Effective processes and systems
Your first priority should be to establish effective systems and strong processes that provide the business intelligence you need for measuring your progress and enabling decision making.
Business systems have evolved dramatically and are designed to save time which takes considerable pressure off staff and business owners. If you suspect your management and accounting systems are no longer appropriate for your needs, it’s time for a systems audit that identifies needs so your future systems can be customised to suit your particular business goals.
Effective systems provide up to date information about how your business is performing and this takes the guess work out of decision making. Well managed systems and processes are affordable, intuitive, scalable and accessible anywhere.
#2: Cashflow management
Managing cashflow is among the biggest challenges for business owners and poor cashflow can be symptomatic of other business problems.
Simple steps for maintaining reliable cashflow include establishing automatic invoicing and reminders, offering discounts for on-time payment and syncing your suppliers credit terms with expected customer payments.
Cashflow forecasting and scenario planning can also help you understand the peaks of your business expenses and customer demand for increased sales which can help smooth out lumpy cashflow concerns.
It’s also important to have adequate cash reserves in place that will enable you to take advantage of opportunities when they present.
#3: Tax planning in advance
Business owners commonly pay more tax than necessary and they can be caught off guard by unexpected tax bills which can severely affect cashflow.
Understanding your tax is more than just meeting your ATO obligations, it’s about getting your BAS, Super and PAYG working in alignment with your other business income and expenses. Tax planning considers your expected business profit and tax liability in advance, so you can plan and make informed decisions about the timing of capital purchases, managing debt and of course, paying your tax liability without adversely affecting your cashflow.
#4: Realistic product and service offering
In an attempt to drive growth, business owners will often look outside their core service offering (and jump too quickly) to offer new products and services. Changing away from your usual products and services or indeed, adding to them, needs careful planning and a clear understanding of the true costs, time and effort involved and the impacts on your operations.
In our experience, business owners who opt to remain in their lane and work on efficiencies first, are usually more profitable than those who take on the time challenges and difficulties associated with implementing new or extra service offerings.
The key is to get advice and be realistic about what’s involved when considering changing your core product and service offering. Outsourcing may be an option for introducing and measuring the success of new products or services, rather than tying up or investing in additional resources required for permanent change.
#5: Understanding your business relationships
Maintaining and continually developing strong business relationships should also rank among your business fundamentals.
Regularly review your customers and suppliers to maintain a sound understanding of your business relationships for assessing increased sales opportunity as well as risk.
If you have customers who are notoriously bad payers or you’re spending too much unproductive time focused on rework, at the very least it’s time to identify issues and if they can’t be overcome, part ways.
Similarly, for suppliers delivering unacceptable quality or unreliable service put them on notice, provide opportunity to fix the issues or move on to alternative suppliers.
Reducing risk and improving productivity can be achieved simply by developing a strong understanding of your ideal customers and working with suppliers that operate with similar business values to your organisation. Conversely, prolonging unsatisfactory relationships will inevitably result in lost time and profitability for you.
Concentrating on these business fundamentals will enable you to focus on what really counts towards achieving business success, and it could also relieve considerable personal time pressure and stress too.
To get back to your business fundamentals, and for business advice that can help you to significantly change your future prospects, we can help. We invite you to make an appointment today. Please contact us on 03 9708 8801 or email info@rvpartners.com.au
General Advice Disclaimer: The information contained within this document is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Robinson Voss Partners (RV Partners) strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.
