Now’s the time for SMBs to reflect on the year gone and plan for the one ahead, and accounting expert John Corias suggests owners focus on five key areas when making plans for the next 12 months.
For small businesses that have the good fortune of taking a well earned rest over the Christmas/New Year period, the break is a great opportunity to reflect on the previous twelve months. For some it will be a time for recovery from a difficult year, whilst others will take the time to celebrate their successes.
No matter what camp you are in, the break from running your business should always see some time spent reflecting on lessons learnt and development of a plan for the year ahead. This need not be a complex process of self-analysis, simply a re-evaluation of where you had planned to be and where you ended up.
From a small business accounting viewpoint, the following areas should be foremost in your thoughts as you develop a plan for the year ahead.
1. Cashflow is King
Evaluate all of your outstanding debtors and do whatever is necessary to ensure that you are paid on time and in full. Make a new resolution to be wary of any new business you take on. Don’t just look at the potential income and profit from a particular customer. If you know that they are going to struggle to pay you for your product or services then any profits can be washed away in the opportunity cost of that revenue. Similarly, have an ongoing plan for debtor recovery, and assign time each week/month to minimising your outstanding debtors.
2. Assess Inventory Requirements
Following on from point one, it is better to only have in stock what you genuinely require in the short term. Any stock that is sitting around waiting for a potential sale is wasted in my opinion. The Japanese have a saying for this, Just In Time, or “Kanban”. By only ordering in what you know is about to be sold or produced you limit the amount of working capital that is tied up in stock. Also, review and eliminate slow selling product lines and offload any obsolete stock that you know is just wasting space.
3. Staffing Requirements
Often this is one of the hardest aspects of managing a small business, as emotional attachments and friendships with your employees can cloud your judgement. In difficult economic times, each employee must be evaluated for what they bring to your business. Each individual has their own strengths and weaknesses but must be productive in the workplace. Depending on your industry, it may be better to use sub-contractors rather than have idle staff members sitting around waiting for something to do and eating up your hard won cash flow.
Part of a fluid business plan must allow for an ongoing evaluation of all staff, why you employed them and what they bring to your business. If your business plan changes or work volumes vary, then your workforce must be flexible and adapt, otherwise opportunities will be lost. If you don’t have this flexibility in your work force, then now is the time to formulate a winning strategy.
4. Technology Requirements
With the rapid pace of technological advancement, it is often an area of small business that can be overlooked. Many a small business owner will take the attitude of “If it isn’t broken, why fix it”. Sadly, this can result in so many lost opportunities to advance your business productivity. Not only does improving your technology add to your internal processes, it will allow your business to communicate with the rest of the small business world in a seamless manner.
Discuss this issue with key staff members and you’ll be surprised at the responses you get. If they ask for a new piece of hardware or software, it will only be to advance their ability to do their job more efficiently. If technology is not your strength, don’t avoid this issue. Get involved with an IT company that knows your industry and can advise on a plan to move forward. If cash flow does not permit large scale expenditure, then speak to your finance broker about leasing options at the same time; there can be no excuses for not acting.
5. Marketing and Social Media
Australia has been one of the most advance countries in the take up of new mobile technology. By 2015 only 18 percent of new computer sales will be desktop computers, the balance will consist of laptop computers, notebooks and tablets such as the iPad.
The explosion in smart phone usage, with more than half of all mobile phones in use being smart phones, means the world has never been smaller or more connected. Facebook, Twitter and Google+ have all put the world in the palm of our hands.
If you haven’t yet formulated a social/mobile media strategy then you are already falling behind. So many opportunities are out there for savvy business owners, but the time to act is now. For small business operators this process is often neglected as it can take a great deal of time to implement and manage. Ongoing management is the key to keeping your social media policy relevant. Marketing experts abound in the marketplace so there is no excuse for not acting and engaging their services.
The year ahead is paved with opportunities for small businesses to thrive and succeed but 2012 will also present its own challenges that cannot be foreseen or planned for. These can and will consist of economic challenges as a result of both local and international forces. Unforeseeable environmental challenges that can impact on you, your suppliers or your customer base. The Queensland floods of 2011 are a classic example of an isolated environmental disaster that had an impact on the entire nation. Personal issues for a small business owner can often be the most challenging, as there is no other business partner to take up the slack should you suffer from poor health or other family related stresses.
Whatever the next twelve months has in line for you and your small business, be rest assured that you do not need to face these challenges alone. Support networks exist to assist you in any and all aspects of your small business, no matter your location or industry. The engine room of our economy needs to keep pumping to keep the adverse international forces currently in play from affecting our secure and relatively stress free way of life. Remember, that we all want small business to excel in 2012 and it needs to be a team effort.