Efficiency is something all businesses can improve on. Estimates from the University of Technology in Sydney are that one in three new small businesses in Australia fail in their first year of operation, two out of four by the end of the second year, and three out of four by the fifth year. Have you ever wondered why, as the years go on, less businesses fail (or more importantly, more businesses thrive)? The longer you are in business, the more efficient you become.

Mistakes are costly and often made most in the first few years of running a business. We learn from our mistakes. We also learn that it is vital to have systems, processes and plans. Rather than learning the hard way, take our top 8 tips on how to improve efficiency and apply them early in your business.

We have had the privilege to work with many different businesses over the past 15 years and from our experience, these tips apply to all successful business models. Growth depends on it. Businesses that want to grow, actively work to improve efficiency. There is a whole lot more to running a business than just selling a product or service. If you are a business owner, you already know this.

Tip#1 Invest in Technology

Businesses that choose to invest in technology, outperform non-technology adaptors every year. Innovation in cloud technology to assist business has boomed. There are a myriad of software products to help improve efficiency. A service based trade business can implement software that will book the job, advise employees, text the client time arrival updates, and even create the invoice and receive payment. Without this software, they would need a physical staff member and could potentially be out of pocket $60K for the year after all expenses. The software could be costing them $5K and apart of the financial benefit, overall client experience has greatly improved. To be able to give clients real-time updates on the status of their repairman, over a vague four hour time window can be the difference you make over your competitors.

There is a software solution for every problem. We no longer need to hire a staff member to solve every problem. Would you rather call a business number and read out your card details over the phone to pay a bill or instead, click on a link in the invoice and enter your own details on the computer?

The world is gearing towards creating quicker, easier, safer interactions with business. Any business owner that does not adapt, will lost more and more of their client base. Particularly as this base is getting younger each year.

How do you know what to invest in? Find a small business advisor that specialises in cloud technology and ask them for ideas. You can also internet search for some software packages. Always have them implemented professionally unless you are confident in learning new software.

We constantly assess the software stack of our clients and our own to determine if we have the best products available for our specific business needs.

Tip#2. Get Help. Don’t Wear Every Hat

One of our previous clients, a savvy business owner had experienced double digit growth each year for several years. When I asked her what the secret to success was. She replied, ‘I do what I do very well. For everything else, I hire the best. Why should I need to learn law, accounting, HR, marketing when there are people out there that do what they do very well. I find them, and then I hire them’

You went into business to make money in your area of expertise. You have all the ideas, all the experience and the drive. Trying to learn marketing for example, will take you a long time, remove you from the core activity you should be doing and take up valuable creative space in your head. You’ll learn about marketing, but at the expense of growing your business.

Hire someone to do the things you need in your unique business. Remember, you get what you pay for. In the beginning, you may not have a lot of funds. The best approach in the early days when funds are tight is to hire for a basic service. You can get basic bookkeeping from $55 per week. You can get basic tax advice when you need it. There are basic HR software advisory packages. There are also basic, entry level marketing packages. These can all be increased later, when you have the funds. However, if you hire cheap to begin with, you will probably end up spending that money on hiring someone down the track to fix their work. So the rule of thumb is to hire well, and start with a basic service that can be upscaled.

A great option for low budget hiring is to outsource to contractors. This is particularly the case with marketing. Contractors are less expensive than employees. For more info on how to work this out, watch our video on Employee Bookkeeper Vs Bookkeeping Business. You can apply these guidelines to any contractor Vs employee.

Make sure you have the best people in your business to give you advice, and once you do: take it. Advice is no good if we’re not willing to give something a try. Always check the source and do your own research, but generally, contract advisors are the experts in their specialty. Leaving you valuable time to grow your business

Tip#3. Lose those Bad Clients

We all have them. They don’t pay, call you at night and on the weekend, demand more than they should and then complain when you don’t fix their problem. Oh, and they never do what you suggest. They live, rent free in our heads, causing frustration. Not only that, until you are free of the bad client, you don’t realise how much they dragged your business back.

My previous business coach advised me to write up four columns labelled A, B, C, D. Under each column, I had to categorise each client.

A clients are the dream client. You love working with them. They are professional, pay on time and if you could have more like them, you would.

B clients are very good. They don’t cause many issues. Sometimes, things don’t go right but all in all, you’re glad to work with them. They’re no dream client but you don’t really have a lot to complain about.

C clients are not easy to work with. Perhaps they pay late, have a lot of needs. Don’t listen very well or adapt to change. You’d be a lot better without them but maybe things will improve.

D clients are the worst. Put a client in this category if you dread their call on the phone. Perhaps they are long behind in paying. They seem to be unable to operate their own business and constantly have emergencies you must deal with.

Once you have done this, here is what you need to do:

• Get rid of the D clients. It might take a big price increase, or simply contact them and let them know its not working out
• Move the C clients to B. To do this, you must make a list of what can be done to move them to B. Work on this list and check again in six to twelve months what category they call under. If they cannot improve, you may need to consider getting rid of them

Why is this important? Getting rid of bad clients is not just removing one or two clients from your business. One D client can take up as much time and energy as several A clients. You will instantly increase efficiency.

Staff will thank you. Chances are, no one liked working with them. Watch morale improve in the team when you cull bad clients. Overall efficiency will improve for everyone.

You now have space to take on more A and B clients. That might sound daunting, but with a new perspective of what type of business you now want to work with, you attract those types.

Tip#4. Manage Your Cashflow

This may seem obvious, but one of the biggest reasons early business openers fail, is due to lack of cash flow management. This is something you need to be very deliberate about.

One of our clients mentioned recently that as long as there is money in the bank, that’s all he needs to know. We hear this a lot. Or the similar statement is that as long as there are funds, I pay the bills.

This client has finally experienced cashflow constraints and this has made him re-assess the procedure. What can you do to manage cashflow? There are several tips here and if you go to the article on this, you can gain some valuable insights.

Tip#5. Offer Multiple Ways to Pay

Yes, everyone can use internet banking. If you are a savvy business operator, you will offer your clients a variety of ways to make payment in addition to internet banking.

Imagine how many sales a website would take if purchasers could only pay by internet banking and upload a remittance. Website sellers know that removing as much friction as possible to the sale, increases sales.

The same applies to all businesses. Here are some great alternatives:

Repeating Direct Debit

Possibly some of your sales are likely to repeat. If that is the case, there should be an option for someone to set and forget. They enter their bank or credit card details once, and the payment comes out each time. How do you set this up? One way, is by asking them to do a repeating payment through the bank. But this causes a lot of friction.

How about putting a link on your invoice that clients can click to setup a direct debit payment? There are options out there that link with accounting packages such as Pinch, Payrix, Ezidebit, Stripe, eWay. This is just a few. You can find others. They all have varying fees but you can usually decide to oncharge the merchant fee to the client or wear the cost. Ask about this option in whichever you choose. Clients can see the fee and decide if they want to setup. We absorb the fee for bank accounts and oncharge the fee for cards.

Credit Card

There are so many ways to take payment by credit card now. You can get an EFTPOS terminal from the bank and with this on the desk, swipe customer cards. This method is the most traditional. It can work if you have a physical store. However, this is an expensive option if you are taking payment over the phone.

Paypal and Square just to name two have a portable reader. There are many now that also convert your phone to a card reader. Square and Paypal have this option as well so check them out. Do your research as there are several providers in this space.

If you issue invoices, consider teaming up with one of these merchant service providers already listed. If they link to your accounting system, they will put a Pay Now link on your invoice and your clients can click this to pay instantly. Remember, to also include your bank details for those that want to use Internet Banking

You need to remove as much difficulty as possible and allow many ways to pay in order to improve efficiency in your business and keep the customers coming back.

Tip#6. Keep Your Accounts Up to Date

One of the least enjoyable parts of running a business is keeping on top of the accounts. No one goes into business to do bookkeeping (except for us that is). Why is it so easy to fall behind and so hard to stay on track?

The best solution here is to outsource your bookkeeping from the start to a professional and advise them you want monthly management reports. If you don’t make this stipulation, your bookkeeper could also fall behind and we’ve heard this many times.

If you decide to do the accounts yourself, ensure you set a date each month by which time the books have to be reconciled. Clean accounts are the backbone of every business’ financial system.

There is no way of knowing how your business is tracking without ensuring the accounts are correct and up to date. They should be reconciled to the balance sheet so you can see your assets and liabilities. Great financial reports give a lot of valuable information. It is important to know not only your income, but your gross profit, net profit, growth patterns, areas of concern, projections etc. Check out our article on reports and which ones are important.

If your accounts are not up to date, you can also not file a tax return, apply for a business loan or credit card, and in some cases, even get an ATO payment plan. The obvious issues are that you simply don’t know if you are actually making money or losing it. The bank balance is not an accurate picture of your business health.

To improve efficiency, this is the single, best way to make huge improvements. If your accounts are a mess, hire a professional to clean them up and learn how to keep them in good condition. Another good suggestion here is to hire an admin person to help you and a professional to check and lodge your documents.

Tip#7. Have an Annual Meeting with Tax Agent

How do you know what you don’t know? Requesting an annual meeting with your Tax Accountant can help improve efficiency and save you money on tax.

Accountants are usually happy to provide the advice but they rarely offer an annual get together any more. This, in the past, was expected by business owners. Something has changed and now, if you want an annual meeting, you need to ask for one.

Be specific about what you want to achieve. Perhaps, suggest to your accountant you need a meeting to go over how to improve efficiency in your business. Ask questions like:

• What can I do better?
• Are there any ways to reduce tax?
• Is my business structure correct?
• How are my trading figures looking?
• Is there anything I should concentrate on in the next 12 months

Your tax agent and BAS agent are best placed to help you with financial advice. Don’t expect them to call you with great ideas. They have a lot of experience, so utilise them to help you improve efficiency. Reach out

Tip#8. Separate Money into Trading & Payable

The money in the bank account is a combination of trading funds and accrued expenses. If you are on top of your accounts receivable, you should have some funds in the bank account that will be used for business expenses.

Most small businesses in Australia are on a quarterly cash basis for GST and either quarterly or monthly for PAYG withholding (tax from payroll).

Every day your business trades (if you are registered for GST), you accrue GST debits and credits (in and out). There is a balance owing to the ATO every quarter and this balance should be set aside into a separate bank account each week. If you pay staff, you will also accrue PAYGW (Pay as you go Withholding tax). This is due once a quarter or once a month depending on your reporting threshold. Superannuation is also accruing and is either paid monthly or quarterly.

Many business owners, in an attempt to set funds aside transfer 10% of all the sales received into a separate account. They then find they have transferred too much and often run out of money which leads them to cease the practice and keep all the funds in the trading account. What they don’t realise is that GST collected offsets against GST paid. So its not accurate to just set aside the GST collected.

The best way is to ask your bookkeeper to work out the correct liabilities balance each week and transfer funds to the offset bank account to ensure they are separated from the trading account and when needed for payment, funds are readily available.

Knowing you have the correct funds allocated in your bank will ensure you manage your cashflow better. This will have a positive impact on efficiency.

Work out in your business were the inefficiencies lie. A good question to ask yourself is: “What is not working well in the business?” or “What could work better?”

These are the areas you need to focus on first. Once you have resolved one inefficiency, move on to the next. The achievement will give you the confidence to gradually improve your business.

Let us know how you go