Small businesses wanting to grow must look at ways to “professionalise” – particularly in their finance management systems – before taking the next step, says Fiona Dixon, business transformation director at HLB Mann Judd Sydney.
“What works for a start-up business with just one or two people, doesn’t work for a larger business that has, say, half a dozen employees.
“For example, a start-up may be able to record invoices or manage tax on an Excel spreadsheet, but once there are several employees or a substantial customer base, this kind of approach will start to create problems for the business.
“While it may seem like a big step to move to proper accounting or payroll systems, in fact it is much easier to use these systems once the business reaches a certain scale.”
She says it doesn’t need to be a daunting or overwhelming prospect.
“Businesses can take a staggered approach, do one bit first and then continue from there. The important thing is to start the journey.
“When I talk with business owners, they are often concerned about the work that will be required to put in place proper processes and systems, and how much it will cost the business in time and money.
“They may also be worried about what this means for their employees – will it affect people’s jobs if part of their role is automated?
“However they should keep in mind that they don’t need to do everything at once. As long as they accept the idea of change, they can start with small steps and change one thing at a time – perhaps start with the accounting system and get used to that, and then add other bits and pieces.
“Once they see the benefits this brings to the business – streamlining processes, providing transparency around numbers, and bringing greater efficiencies – it becomes easier and easier to take the next step.
“Usually, they also find that while it may change some people’s day to day roles, it also helps free up their time to undertake other tasks, which is an advantage to the business.”
She uses the example of a small consulting firm that starts with just one person.
“In the beginning, the business had just one employee – the owner – and half a dozen clients. In this situation, it was relatively easy to manage the tax, reporting, payroll and invoicing using existing spreadsheet or word processing software on their computer.
“However after a couple of years, the business had grown, employing three other people (one part-time) and with over twenty clients.
“Managing payroll – including superannuation, bonuses, holiday leave and other leave – becomes much more complicated, to say nothing of properly recording and reporting the work undertaken by each employee in order to prepare invoices, and managing BAS and other tax requirements.
“For the business to consolidate its growth, as well as grow further, it needs to implement proper procedures and have dedicated software to manage its reporting and regulatory requirements, both to clients and to the ATO and ASIC.
“One big benefit of doing so is that it frees up the managing director’s time significantly. In the past, she may have spent several days each month preparing invoices, producing reports and managing tax records and liabilities. Now, this takes less than one day, freeing up time to spend either working with clients, or else taking a strategic view of the business by using the data now available to identify opportunities or address problems.
“Another benefit of having proper processes documented is that it helps establish business value for the future, so if the time comes to sell the business, there are clear records for any prospective purchaser to use.
“There is now some very useful technology available to businesses, even the smallest of business, that can help them become more efficient and professional, and it is the best way to achieve growth,” Ms Dixon says.
HLB Mann Judd Sydney is a firm of accountants and business and financial advisers, and part of the HLB Mann Judd Australasian Association.