We’ve all heard about the catastrophic bankruptcy of Enron, and closer to home, Fidentia Insurance. In each of these examples lack of transparency was key in their undoing according to Kevin Phillips, managing director of Idu Software. While SMEs are not operating on the same scale as these companies, there’s still a lot to lose. Here are four pointers to make sure your business doesn’t make it into the hall of spectacular bankruptcies.
1)Have a system in place
That shoe box with a bunch of dog-eared, coffee stained invoices doesn’t count. We know that sole proprietor businesses are hard-pressed for time and their attentions are needed for things like bringing in the money. But that’s exactly where a proper system is vital. When things get busy it’s not uncommon for some accounts to get lost or forgotten about, that means lost or forgotten money. Often by the time something fishy is spotted it’s already 6 to 8 weeks old. Make the time to update and keep your records tidy.
2)Use the right tools
It’s that shoe box again. Business owners can’t expect their accountants to provide accurate information quickly if they are presented with a wad of disorganised papers. Accountability starts with you. For those businesses that can’t afford a full time accountant, consider a consultant with an online system that allows you to view your information as and when you need to instead of waiting for them to get back to you.
3)Look to the now
The perception that numbers come at the end of the month needs to be debunked. A long time ago accountants kept actual books and had to use pens and an abacus to generate information. This took time. It therefore meant that reports could only be provided some weeks after the end of the month. Now days, communication technology and software have closed the gap between input and output. You can now reasonably expect to be able to track during the month and get information much quicker.
It’s important to have more than one set of eyes on your books. If people in your company understand what is normal activity and what is not, when something goes awry your odds of spotting it quickly are much higher. Find ways of presenting your finance information to include non-finance managers. It spreads responsibility and encourages interest and accountability. Avoid that air of mystery around your books.