Key skills for Owner-Managers: To Delegate

Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.

Delegating is one of those essential skills that many people need. As the business grows, owner-managers can get into a "delegation crunch." Business owners through to managers all need to be able to delegate well otherwise they will find themselves swamped with too much to do and not able to focus on the tasks that require their specific abilities.

What's keeping you from delegating? Probably, it's either believing you're the only one who can do a task correctly, feeling like you need to be in control or attempting to address unmet needs. Have you ever said, "No one can do it as well as I can." The truth is, there are many experienced people who can perform certain tasks as well as, or even better than, you. Nevertheless, there comes the time in every business where the owner-manager must selectively give away responsibilities if they want to see their business continue to grow and prosper.

To resolve this problem, as a company owner, you must decide what is your best value-added to the business (be it marketing/sales, product development, operations or finance) and then install and develop key people to handle other important aspects of the business. Here are some guidelines to find the right delegates and then to increase their success in your company.  

Search a delegate: First seek out a capable delegate through personal, business and industry networks. If your network does not surface the person you seek, then look to outplacement firms which help to place many laid-off managers and executives, some of which may be a good fit for your organization. Another possibility is to completely outsource the position. There are service companies as well as individual professionals that will take on all your human resource management or accounting/administration management functions. This is especially attractive if the work does not justify a full-time individual.  

Be precise about your goal: When you find a suitable delegate, be clear about the specific goals that you want your delegate to accomplish, and by when. Leave the "how" up to the person, because that’s what you hired them for. To build the delegate’s motivation, explain why those goals are important, the benefits for the business and for them personally. Provide your delegate sufficient authority (with customers, suppliers, employees, etc.) to carry out their goals. The last thing you want is for your delegate to hit roadblocks that you could have easily removed beforehand.  

Manage the delegate: When you delegate, decide on how much control you want the delegate to have with respect to making decisions and taking action. Consider whether they should investigate situations and make recommendations to you before they act, or should they just go ahead and act and then let you know afterwards. Meet regularly with their delegate to check the status of action plans, and/or have the delegate write up a regular status report on their goals and accomplishments.  

Review: Lastly, it is important to appropriately acknowledge the person for their performance. Also, maintain a record of the delegate’s accomplishment and areas for improvement in order to appraise his or her performance regularly throughout the year. Finally, assess whether the delegate can take on more responsibility, and what you think could be their best value to you and the company in the long run.

Delegating is an essential step to spending your time wisely and achieving your goals. Business owners need to consider delegation as a tool for their personal effectiveness and business growth.

Profits or growth? Choose the right strategy for your company

Why the logic of focusing on growth first and worrying about profitability later is often a bad idea?

Should you put profits into your pocket or back into your production?

Every management team that wants to build a much bigger business eventually asks itself this question: "Why don’t we focus on growth first and worry about profitability later?"

The logic may be valid, but the strategy is often flawed.

Here’s why: Profits are fuel for a growing company. Without profits, it’s hard to invest in the growth you aim to achieve. A growing company reinvests its profits back into the business in the form of marketing investment, new employees, new equipment etc. If you are consistently selling at a loss, you’ll quickly run out of capital to fuel your growth.  

Choosing Profits
There are strategic reasons to focus on profitability as well. If you are continually selling at a loss, you may not be "proving" the sustainability of your business model.
If you are selling something that your customers perceive as valuable–but only at a low price–you may find yourself in a bind later because you haven’t created a customer value proposition at a higher price point. In fact, you may be forced to continue to sell at break-even or below to cover the overhead you’ve built up.  

Making a Decision
To decide between profit and growth, a private business should look to the shareholders and their long-term goals.
Deciding whether to go for growth or pocket the profits should also be weighed against the kind of funding available to the business. If your business is not a good venture capital or angel investment candidate, this could be a dangerous path.
Profitable companies attract a very different kind of capital such as private equity funds, commercial lenders, etc. Paradoxically, some of these same bankers will even finance growth once the profit model is proven and reliable. But in all cases, profits have to be pretty strong and steady.  

Staying the Course
Either strategy can provide a great way to build both personal wealth and a healthy business, as long as you are clear about it and dedicated to the path forward. The real danger comes from wavering and trying to do both.
A high-growth company that slams on the breaks to harvest profits becomes a disappointment for the venture investors. Likewise, a profitable company that suddenly plunges into a loss situation to finance growth appears too risky for bankers. Moving from one mode to the other is a sure way to stumble.
Sacrificing some short-term profitability for growth can work–if you are able to quantify your expected losses, if you have a source of capital to fund those losses for a period of time and if your equity providers agree with the strategy.

Profits are essential for growing your business at any stage. Most companies will find that focusing on profitable growth leads them to better strategic decisions and provides a much stronger foundation for a healthy, sustainable business model in the long term.

Top ten bookkeeping mistakes you should avoid

Ninety percent of business failures are caused by poor cash flow, which largely stems from an inability to manage finances well, so here are ten of the most common accounting and bookkeeping errors made by businesses - and how you can avoid making them.  

1. Failing to follow correct accounting method
There are two main business accounting methods: cash and accrual. Cash accounting is the simpler method because it's based on the actual flow of cash in and out of a business. The cash method is used primarily by sole proprietors and businesses with no inventory. On the other side, accrual accounting records income and expenses as they occur, whether cash has actually changed hands or not.
As they grow and become more complex, most small businesses should switch to accrual accounting, because this makes it easier to accurately match revenue to expenses.  

2. Working without a budget
You will want to create a budget so you have a baseline to judge your business’s operating results. Budgets are not only useful in curbing overspending, but can be used to establish realistic, written financial objectives. Budgets should always be grounded in reality, but you can certainly use your budget to set reasonable financial goals, whether it be increasing revenues or reducing operating expenses.  

3. Combining personal and business finances
It is very important that personal and business finances are kept separately, regardless of size. That's why one of the first things new business owners should do is open a business bank account and deposit all business income into this account. Use business income to meet all the business investments and expenses.  

4. Not performing basic account reconciliation
Reconciling your business's books with your business bank statement every month is one of your most fundamental accounting duties. Account reconciliation is relatively simple: Just compare your books with your bank statement and make sure there are no discrepancies Doing this on a monthly basis helps ensure that accounting errors are caught and corrected quickly before they result in major financial problems.  

5. Overlooking 'petty cash' reserves
Business owners often operate with a small amount of petty cash, but have little or no knowledge on how to track it. Be sure to set up a system which allows you to track the cash kept on hand for the business and for what it is being used.  

6. Not knowing the difference between profits and cash flow
A business can have positive cash flow in the short term but still be unprofitable; conversely, it can have negative short-term cash flow but still be profitable in the long term. The first scenario is common among small businesses because they often have to pay suppliers before they get paid by their customers. The second scenario is common among point-of-sale and cash-based businesses, such as retailers and restaurants that pay their vendors on terms.  

7. Not Classifying Employees Correctly
Businesses often have a combination of both employees and independent contractors which make it difficult to determine who is on staff and who is not. Make sure these are properly classified to avoid misfiling and overpayment of taxes to the government. These results in misfiling when it comes to filing taxes since there are different rules and regulations for employees and non-employees  

8. Forgetting to track reimbursable expenses
Small business owners often pay for expenses out of pocket or with their own personal credit card then make the mistakes of failing to track these expenses. They then fail to submit the expenses to the company for reimbursement.  

9. Failing to Back Up Accounting Software
There is always a chance that something could happen to your data and you need to be prepared. It is important for every business to back up their data to avoid potential losses. A paper trail, documentation or verification in the form of backup documents should be available, especially if all files are on the computer system, which could be prone to technical problems.  

10. Relying too heavily on a paperless environment
To reduce expenses and be better stewards of the environment, many companies today are trying to go paperless. In the realm of bookkeeping and accounting, however, there's simply no substitute for paper documentation and a paper trail, when needed. There are many instances in which paper documentation of financial records will come in handy or be required. While being environmentally conscious is important, bookkeeping isn't an area where you should skimp on the paper.