For many, the word “data” is an instant turnoff. They argue that “playing around with numbers is a waste of my time”.
But pause and wait for a moment to consider. Not having good information / data about your business may be what got you into your present pickle.
In this Turnaround90 Campaign, we are not going to spend a lot of time on setting up a “good” data system. But, we are strongly recommending that you consider a few changes (where necessary) to get the data that you need to inform your decisions in T90.
You likely have a bookkeeping system that feeds into your annual tax accounts. Following are suggestions on improving the usefulness of your bookkeeping to assist in your turnaround:
- Increase how often you process information through your accounts. If your cash flow is the problem (you are running out of cash to pay bills), update your books every week.
- Plan to get your P&L and Balance Sheet back from your bookkeeper in the first week after the end of the month. Even better, would be weekly. You are in a 12 week sprint to save your business so quick access to information on changes is vital.
- If you have Accounts Receivable (billing people who owe you), enter them at least weekly, and preferably daily, if they are an important source of income. This is essential for a decent Cash Flow.
- You will have Accounts Payable (money you owe others). Enter any incoming bills to your Accounts Payable as quickly as possible. Daily would be best if you have a Cash Flow problem.
- If you are a project orientated business like accountants, architects, consultants and some builders, try to get your Work-In-Progress (WIP) into your books. This is work you are doing and will be paid for at some point in the future. Because of the lags in receiving cash for work completed, if you don’t include WIP you will not get a true assessment of your position.
- If you are an inventory oriented business like wholesale/retail, manufacturing, move your accounting for inventory from a cash basis (on your Profit & Loss) to an accrual basis (on your Balance Sheet). If it remains as cash, it distorts your profitability for the period, if there are large inventory purchases.
This extra work, and possibly extra bookkeeper’s costs, is a nuisance. But, if you don’t have a clear insight into your cash and profitability pictures, you will be crippled trying to do your turnaround strategy. You can reduce the tempo once your business is more healthy.
Data for Ranking
As you progress through this course, you will learn that we strongly encourage you to focus on what is the most important issue and fix that before working on less important issues.
You will be asked to list and prioritise some data. For example, you will list all your Overhead Costs and then focus on the biggest. Five percent saved on a big expense like staff will have a much bigger effect than 5% saved on a small cost like newspaper subscriptions. For example:
- 5% on wages of $300,000 is $15,000
- 5% on newspaper subscription of $1,200 per year is $60
- it is fairly obvious which is the best use of your time when time is scarce.
If you can, these sorts of ranking lists are best done in tabs on a spreadsheet. Depending on your skills with spreadsheets, you can sort and prioritise them easily.