The Business Fundamentals Every Successful Business Needs!
How many have you got right?
POSTED BY JONATHAN VOWLES ON 13/02/2018 @ 8:00AM
Starting a business is a simple premise, but to start a successful business, well, that's more difficult. Over 500,000 new business start each year, but many fall by the wayside as they don't have the fundamentals right ...
Get your business fundamentals right and you're on your way to success!
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At JVCA, we support many potential entrepreneurs as well as those who have already made the leap into business for themselves. Here's some of the advice I always give them if they want to succeed:
Numbers are the language of business and you must produce your numbers regularly. Without regular periodic and accurate financial statements, such as a profit and loss account or operating statement and a balance sheet, you aren't going to succeed. Put succinctly, you can't get where you want to go if you don't know where you've been!
... and, on a related topic, if you don't know where you are going then how are you going to get there? Make sure you have a business plan, even if it is only a rough and ready one, that is linked to achieving your personal goals.
You need to manage your cash. Most business owners are already thinking about how much they have in the bank and what bills are due now, but you also need to project and manage your cash over the next 12 months or so.
How do you know you can pay yourself your wage next month, let alone invest in the future of your business if you don't have that future cash view? Running out of cash is what normally kills any business.
If you carry stock, then you know that is money sitting on the shelf. Carry less or none at all! Successful stock management means getting it out of the door as soon as it arrives. Unless you don't have to pay for it, don't carry stock just in case! As much as possible, go for just-in-time or even get your supplier to ship it directly to the customer.
If your customers pay in arrears on invoice, then understand your debtor days and the relationship between that and how quickly you pay yourself and your suppliers.
Where possible get the money from your customer before rather than after the sale! The true cost of a bad debt is that you need to sell 5 or 6 times as much to get that cost back! Making a sale is good, collecting the cash is better!
For most businesses their single biggest cost is their people. What can you and your employees do to be more efficient? Explore technology and automation and don't allow inefficiency to exist in your business.
Costing and pricing
Profit doesn't just happen. It is the result of understanding what it costs you to do something and what you need to charge to make a profit. Perhaps surprisingly, this lesson needs to be learned!
They are called business fundamentals for a reason, and if you get them wrong and it hurts. Get them consistently wrong and your business will go bust!
"Would you like to know more?"
If you don't have these business fundamentals sorted, then get in touch with me urgently on 01234 752 566 or click here to ping me an email so we can help you fix this!
Until next time ...
If you're looking for a new accountant to help grow your business, do visit www.jvca.co.uk and discover how Jonathan Vowles Chartered Accountants can help you!
I've been an accountant in and for business since 1987 and have a wide experience of consultancy, audit, accounts, taxation and wealth planning work from individuals and small businesses to multinational corporations and charities.
My eclectic interests in growing and developing business span a number of areas … and can be summarised as strategic business advice and tax saving advice.
I have worked with the Chamber of Commerce to deliver courses for people about starting up in business and have lectured about tax for a major accountancy practice and for Milton Keynes College.
I relax by reading fiction and by getting away from the office in a campervan.