In the 15th century, an Italian mathematician invented the idea of a trial balance to check that accounting systems were correctly in place. We’ve been using this system in the five centuries since. It’s a reliable measure that your accounts are in good order but there are three tell-tale signs that your balance sheet is peaky – and about to be tipped.
The first clue is when your business has so much to do and everyone is so busy that no-one notices you are going into the red. If you are making sales and customers are happy, how can there be a problem? The answer is of course – easily! Unless someone is keeping an eye on whether you are paid for all those sales invoices and on time – it’s very easy to get in a financial pickle. If there is no-one in your business who is monitoring your financial performance, you can quickly get in a ‘fine mess’ as Oliver Hardy might have said. The solution, of course is to outsource your accounting function and focus on what you are really good at – such as sales.
Clue number two is that the business does not have a strategic plan. It doesn’t really have proper sales targets or if it does, they are poorly communicated. Staff don’t really understand the order in which they should do things – maybe the business is so busy that vital activities are not prioritised. Basically, the business lacks proper leadership as the leaders are busy doing other things. The trick is to outsource the things that you can’t cope with – or at least need help with – to give you the time to look at your business in a strategic way and be able to plan the next steps before the problems arise.
The third thing that gives away the idea that things are not good in the finance department is that there is no check on spending. Items are purchased in a haphazard way, not taking advantage of incentives or bulk-buying or advantageous terms, expenses are not monitored or capped and generally, the business is spending more than it is earning. With outgoings for a new business high in the early stages, this needs to be carefully planned. Again, a good way to keep track of your finance department is to have specialists take over through outsourcing. You can outsource as much or as little as you like – from just your sales invoices to the whole department.