small business gurus - the blog of Cat & Keith Matson

by Cat Matson

One of the things that drives me nuts is ‘gurus’ offering magic bullet solutions for business success.  You know what I mean –“just handle your systems, then your business will be awesome”, or “hire the right staff and you’ll never have to worry again” or my favourite, “our 25-point system will make even the most challenged businesses thrive”.

There is no magic bullet for business success.  There is no 'one-size-fits-all' system for creating a successful business.  Success in business requires trial and error to discover what works for you and then consistent, persistent effort.

Most reasonable business owners know this… the problem is, even the most reasonable of business owners can become quite irrational after months and months (or even years and years) of challenges.  So they look around them for ideas, strategies or techniques that could work.  The problem is the techniques that are working for other businesses are working as a result of their unique combination of resources, people, customers, expertise and operational context.

So instead of magic bullets, I encourage business owners to look for generalised principles (principles that are true in all cases)…. then apply those principles to their particular context.

Having a Strategy is generalised principle – your chosen strategy though will be different to your competitors.  Strategy is NOT about a complicated plan, it’s a foundational choice about how you will approach your market and the environment.  When Virgin Blue decided to be Australia’s low cost airline, they had to structure their entire business in a way that enabled them to deliver low-cost flights.

A Marketing System is also a generalised principle of business – marketing that supports your chosen strategy and consistently generates desired leads.  Also a sales system, HR system and administration systems – all these systems are required in your business…. how they work for you depends entirely on your business model, strategy and context.

We want magic bullets because we want certainty – trial and error scares us because it’s uncertain.  So think of trial and error as ‘market research’ (not failure); after-all, Edison successfully found 1,000 ways that didn’t work, before creating the light-bulb.

Cat

Alito - business mentors

by Cat Matson

News today that a payroll officer has defrauded electronics retailer Clive Peeters of $20 million positively blows me away (full article here) (apparently the employee falsified online payee information to transfer money to her personal account rather than where it was due, for example the ATO).

It blows me away because it demonstrates the complete lack of checks and balances that must have been in place to allow something like this to happen.  For example, who was checking that creditors were receiving their due funds?  What was happening to reminder notices received from creditors who were being short-changed?  Why did it take until I'm guessing the end-of-year audit to discover 'accounting discrepancies'?  Sure, it's a large, listed company, and things can fall through the cracks... but $20 million (in a business that reported a profit of only $10 million last year) must have disappeared down a pretty big 'crack'.

So this example is a 'exceptional' one - big business, harder to 'control' the details.... yet, reality is, many businesses are doing the same thing.... in the name of 'trust', 'outsourcing', 'delegating' and 'empowering employees' business owners abdicate responsibility for the details of their business.

Now, I'm not saying that you should be a control-freak and let nothing out of your sight... but you need to get VERY clear on what 'liberties', access and permissions you give your staff and contractors.  It's not about creating an unnecessary systemic burden on your or your staff, or creating a bureacracy of 'double-signatures' and double checking before anything is done.... but there is a middle ground where the business owner and manager must take responsibility for MANAGING the business.

Peter Sexton, audit partner at WKH Horwath makes a couple of sound suggestions in the article - for example, ensuring that employees don't have the ability to change the account numbers of creditors, and completing a spot-check at the end of every payment cycle to ensure the correct payments have been made to the right people.

Keith Matson (my husband and Managing Partner of Alito's Accounting services) says the same thing.  He also says it's important to give financial personnel levels of authority - for example, they're only allowed to pay up to $X - anything above that limit requires a 'double-approval'.  Sexton's comments that electronic banking takes away the security of double-signatories is slightly misleading - the token system means companies can still enforce a 'double-signature' payment.  This system means that your accounts payable clerk processes the payments... then a more senior person can check payee details (at random if necessary) before approving payment by issuing the second token.  It just requires though that the second token holder (or signatory) actually checks the details of the payments and doesn't carte blanche apply their token to approve the payment.

As for those of you crying 'oh, that wouldn't happen to me, I trust my staff', I say it's not about trusting your staff.  It's about knowing what's going on in your business.  (By the way, my definition of an honest person is someone who hasn't been offered enough yet).  "The purpose of having the system in place to prevent action being taken on the temptation", says Keith.

So my 'take-away' tip for business owners.... review your checks and balances and know... I mean KNOW the financial details of your business.... it is, afterall, your business!

Cat

Igniting your business performance

Alito - business mentors & accountants

by Cat Matson

I am a big proponent of business owners having a clear strategy.  I’m not so big on ‘plans’.

Plans invite us to drop into minutiae, a level of detail that doesn’t serve us in achieving our goals… but also puts us off creating the plan to start with.  Plans also feel a bit more rigid… and for entrepreneurial business owners, they can feel a bit stifling, not leaving enough room for creativity or spontaneous response to changing conditions or new opportunities.

A strategy however is quite different.  Your strategy is the over-riding theme for how you are going to achieve your business goals.  It gives you the foundation on which to build detailed execution plans, if that is your style, but doesn’t require that level of detail to still give you a strong sense of where you are going… and how you are going to get there.

What makes up a good strategy then?

A good strategy simply answers the following questions;

WHY are we in business?  Why does the business exist (think both in terms of value it provides customers as well as value to the owners)? 

WHO are we?  What do we (as a business unit) stand for, what are our values? 

WHO do we serve?  What is this group’s ‘problem’ that we are fixing?

WHAT do we do to fix the customers’ problem? How do we fix the problem in a way that’s different to our ‘competitors’?

HOW do we make money by fixing the customers’ problem?  What is our business model?

WHERE do we want to be in the future? Can we get there using this business model?

WHEN do we want be in that future position?

If you (and your team) can answer these questions clearly you will have a strong compass for running your business.  Economic, political, environmental or even technological conditions may change…but with a clear strategy you’ll be able to keep moving ahead… it will just be the ‘details’ that might change.

Cat

Igniting your business performance

Alito - business mentors, accountants, educators and consultants