How Accurate Business Records Can Improve Your Profitability
Your business may be on the brink of collapse and you don’t even have an idea! In today’s competitive economies, any business that is not improving is surely on a steady decline. To stay afloat, stave off competition, and turn a decent profit, your business needs a strong record-keeping culture.
“If you can’t measure it, you can’t improve it” Peter Drucker.
This quote by successful business mogul, Peter Drucker, should be framed and hung in every business owner’s office as it is a foundational principle. It is critical to keep detailed records of every aspect of your business for the following reasons:
Gauge the effectiveness of your expenditures
There are a thousand and one tools that are being advertised as “driving business growth”. Digital marketing, fancy productivity tools, content development services among others are the in-thing for businesses these days. Most businesses are pushing for a wider audience on social media.
These things work, however, there’s often a point of diminishing returns where the amount expended becomes way greater than the revenue generated. Without keeping accurate records, this becomes a cash drain for the business, slowly losing money despite the fact that the customer base is being expanded.
Action point: Measure everything! Most digital marketing tools have analytics such as interactions, click conversions, etc. They’re not there by mistake, run the numbers and be sure that every cent spent is justified by commensurate income.
For productivity tools and others, ensure that your staff give feedback on a regular basis, so you can know which subscriptions to pull the plug on as they’re no longer working.
No matter how careful you are in the recruiting process, it’s inevitable that some of your employees or even partners will try to steal from the business.
Fraud is one of the biggest causes of business failure and it stays unnoticeable until things get really bad. It, therefore, becomes very important to keep detailed records and track the flow of cash through the business.
Action point: If you’re finding it difficult to keep financial records because of the size of your business, you may consider finding an external auditor.
Preferably, you should contact certified professionals such as auditors who will go through the existing records and fish out any previous fraud. Going forward, you can employ a chartered accountant to help track the flow of money through your business.
Legal Agreements, Receipts, etc.
Lots of businesses get into trouble and have to close down after losing huge sums in lawsuits. This often occurs due to inability to keep records of contracts and copies of agreements signed with counterparties. How can you ensure you don’t fall a victim to this? Find out in the action point below.
Action point: If you can afford it, employ a lawyer, possibly on a part-time basis. This legal staff will be responsible for keeping records of contract documents and going over contractual terms to ensure that they’re in your favour and you don’t lose out whenever litigation comes up.
Not keeping detailed records can be detrimental to your business. However, by following the above action points, you can plug the leaks and build the profit-generating business you have always dreamed of.