It’s all about the money… or is it? Why did you set up in business for yourself? In my own case it was because I was unemployable. I thought I was smarter than everyone I had ever worked for, I was bored in most of the jobs I’d done and I thought I was worth a lot more than I could earn in employment. But this was the Seventies and times were different obviously.
At the age of 22 when I first became self-employed as an accountant, I was terrified but exhilarated at the same time. I was very ambitious and hungry and I had lots to prove. But mainly I wanted to make lots of money for myself and that hasn’t really changed all much; I still enjoy lots of money and that’s good, as working with people and their money has become my raison d’etre.
Initially that did happen, I did make lots of money but I also worked all hours, and it was a couple of years after I first set up the business that I took my first holiday. That’s two mistakes straight off: working inhuman hours and not taking enough rest and holiday. But when you are a newbie sole trader and business is coming in, you just want to keep your clients happy.
Soon you realise that you are only going to make any real money if you employ others enabling you to increase your profits and earn while you are not working if you contract with staff and charge out their time at a higher rate. And then your problems start, but that’s another story for another day.
More staff equals more money but introduces more problems – premises for them to sit in, computers for them to use, driving enough business to keep them fully employed, managing cash flow which is the lifeblood of your business and more. Nowadays a lot of work can be done virtually which could reduce the premises and computers issue, but not the business-getting or cash flow management now that you are The Boss.
I remember with horror that by this stage of my own accounting business the cash flow headache was a pretty constant one. People don’t like paying their accountant, it seems, so we introduced a monthly standing order system so that clients didn’t get a big shock from a big annual bill which they would then struggle to pay.
You can see from this scenario how many hats I was wearing: main technician, business manager, sales manager, personnel manager, facilities manager, IT manager, credit control manager and financial controller. No wonder twenty years of that practically finished me off – all that managing was not my forte and not why I went into business. I’m an entrepreneur!
If we think for just a moment about the accounting functions I was providing to my own business as an afterthought, because my first accounting call of duty was always to my clients, then here’s a list of tasks which need to be taken care of so that the burdens of running your own business can be lessened.
- Credit control and debt collecting
- Cash flow management
- Payroll calculations and paying staff on time
- Bank reconciliations and liaison with Bank Manager
- Management accounting
- Year-end accounts preparation and submission for audit
Question: Why on earth did I try to do all these myself? Answer: Because I could. Do you try to do all these functions yourself? If so, why? And if you delegate them to a member of staff or an outside contractor, how can you be sure they are being looked after properly?
I still look after the accounts for a couple of clients. I like to keep my hand in and to be part of a team. My biggest client says his accounts department (me) is the only part of his business which works perfectly. Interestingly I find this much easier to do for someone else than I do for myself. Perhaps this is because I do it professionally and therefore have a distance which provides perspective. Perhaps I was too close to my own business for my own well-being or the financial good of my company?
How can you be sure that you have all these parts of your own business covered perfectly? If you are a new start up, please put in the infrastructure you need from the beginning or as soon as you can afford it. We used to think that the first decent business decision any of our clients took was to hire us to do their finances and concentrate on what they were good at.
Equally you must know enough about what is involved to be able to get the best from your accounting team and procedures and be able to read and enjoy the financial reports you are given. My top recommendation? Stick to what you are good at and surround yourself with good financial support.
Do let me know if you need help with any of that. Maybe I can help or point you in the right direction for your own small business.