Running a business requires multiple tasks being completed by many people and different functions, often at the same time – sales meetings, order processing, scheduling, invoicing, paying bills, hiring, managing, bookkeeping, banking, firing, delivering, quality checking, and so many more. In many cases, one task must be completed to trigger the next or the lack of a task being completed will affect the quality or delivery of products or services, making organization critical in any business. If you’re not convinced organization is important in your business, consider how it can affect your profitability.
Cash Flow Mismanagement
If you don’t have a good process established to get invoices out to customers after services have been completed, then you will delay customer payments coming in. However, you can’t delay paying your team, and you’ve often already paid for the products and materials needed to deliver, so you’ll have money going out the door, without adequate funds coming in to support the outflow. This might require that you carry a balance on your line of credit, which increases your interest costs. Or you might miss out on vendor discounts because you won’t have the cash to pay early, which cuts directly into your margin. Therefore, having a streamlined invoicing process in place that gets cash in the door quickly is important to improve your profitability. It is also essential to have a consistent AR management process in place. Make sure you have a regular follow up schedule, you’re reviewing aged receivables weekly, and you’re not letting your receivables get too far behind.
Sales Process Delays
A defined, streamlined sales process is also critical to profitability. If you don’t have a good process in place for putting out proposals, following up on deals, and keeping a good pipeline of new deals, you’ll struggle to achieve maximum profitability. Customers are looking for partners that are efficient, streamline the process, and make it easy for them to buy. If your sales process lacks this efficiency, they’ll go somewhere else, you’ll lose the sale and have wasted time and resources in the broken sales process. Develop a sales process that is clear, simple, and has designated tasks for follow-up. Follow up should happen at regular intervals so that potential sales are not lost just due to them falling through the cracks.
Compliance Errors
One key requirement of a small business is to keep up with compliance requirements. This includes sales tax reporting, payroll tax payments and filings, government license requirements, vehicle and property registrations, income tax filing, insurance reporting, and so many more. Many of these reporting requirements carry stiff penalties if filed incorrectly or if deadlines are missed. It’s important for businesses to understand their reporting requirements and have good checklists and task management systems in place to ensure they are all completed accurately and timely.
With all areas of small business, there can be an impact on profitability due to a lack of organization. One of the easiest ways to combat disorganization is to create processes and implement checklists and systems to help manage those processes. Have a weekly checklist in place for managing your accounting tasks, develop a workflow for the sales process, or implement a task management system that reminds you of monthly, quarterly, and annual reporting requirements. Disorganization kills profitability. So, if you can’t think of another reason to get organized this year, do it to improve your bottom line.
