Strategic Finance magazine had a great article last month about Continuous Risk. And it got me thinking about how that relates to my clients.
First, what is continuous risk? Continuous risk isn’t a set event like market price fluctuations, data breach, cyberattacks, employee fraud, or some other specific event. This article reported that continuous risk “enables 20% of (business) earnings to evaporate in the form of avoidable, low-value activities performed by highly paid knowledge workers.” Right. So what does this mean to my clients?
How many of you offer services to a business, and the President/CEO is your contact? Is this the most effective use of their time? If they’re small enough, they generally do everything, and that may be OK. But you don’t find the CEO of a Fortune 500 company handling the accounts payable, or calling their customers about delinquent accounts! They hire competent staff to delegate that to.
So what about my clients? Often times, they’re just starting to evolve from a one-man shop and start hiring staff. Depending on the nature of their business, they may hire a marketing person, an admin assistant, or someone to help with the technical aspect of the job. But they’re still spending a great deal of time handling the day-to-day work, including their accounting. And as often as not (OK, probably MORE often), the accounting is seen as a necessary evil, and they put it off, and procrastinate getting anything done until it’s grown to a mountain of paperwork and they’re overwhelmed. They then spend many late nights agonizing over it just to make a tax deadline. They swear they’ll do better starting in January… and January comes and they’re still bogged down in the details of running their business, and get sidetracked and again the accounting falls by the wayside. No matter what though, this cost of wasted time is not a metric a business usually has any way of tracking on their reports as there is no cost deviation to see. All of this sounds familiar (or more than familiar!), right? So what is the solution?
- Hire someone! The cost of hiring an outside person to manage this detail for you will FAR exceed the money lost by focusing on it yourself.
- Second to that, make sure you hire someone competent. Get referrals. Your CPA will be your first referral source as he will only refer someone who’s work he respects, and who’s style will mesh with theirs so there is no conflict, but more importantly, someone who’s work he understands and there will be fewer questions, and thus cheaper in the long run.
- Automate your system. If hiring someone is just too far out of your league right now, find a way to automate your accounting. Xero and QuickBooks both offer online solutions that work on bank feeds to manage your books. In both, you can set up reoccurring bills to your clients so if you work on a flat fee, it eliminates the work of billing the client.
- Some still aren’t comfortable with this level, and for you, I say get envelopes and get religious about putting ALL receipts into those envelopes. Mark it by month, mark it by expense (preferred), and at least make the work easier for yourself at the end of the year. [hint: before I automated, I sorted my receipts on the floor while watching the evening news.] Use the voice-to-text or voice recorder on your phone to walk and take notes on invoicing your customers. Then six months down the road when you remember to bill, you’re not relying on your memory for job details.
Find a solution, put in the work to implement it, and free yourself to focus on the other million and one things you have to do as a small business owner. Eliminate the “risk” of losing profits doing what you don’t really want to do anyways.