You are in business to make a profit. It is worth repeating here that profit equals revenue minus overheads.

The most important part is the generation of revenue, whether you are selling something, making a product, servicing customers or any other activity. It is in the interest of any business to secure as much revenue as possible whilst keeping under control the overheads. This is the reason planning and controlling your business in the greatest possible detail is essential and, monitoring the performance of your business against your business plans regularly. This is why your administration should be organised to give you all the information you require with as little delay as possible.

Stock control is a very important item that has to be dealt with continually. Some of the costs involved in stock items should have been covered in the business forecasts, but not all. If you carry too much stock of products or materials, whether bought in or manufactured by you the same result applies. You have tied up capital and labour that could be used for other purposes. You also have the danger that the stock could depreciate and even become obsolete. If you stock too little or carry too small a range you will lose sales to your competitors. It is essential therefore to have a good, efficient and accurate stock control that gives all the information you require such as cost prices, date of purchase, maximum and minimum stock quantities, turnover ratios and any other information relevant to your business. A typical use for a good computer program.

Another administrative function which needs careful and close attention is debtors. If your normal trading terms for credit transactions are 30 days from the date of supply you expect to be paid within that 30 day period. If you are not paid within that time your customer is in default. So take action to recover your money immediately your customer breaks the agreement. This does not mean becoming heavy handed or upsetting the customer, very often a simple polite phone call will resolve the problem. Explain the situation. Ask if there is any sort of problem with your goods or service and make the point that you agreed terms which they have failed to keep. If you still do not receive payment after a few days confirm your telephone conversation with a letter adding that you require payment by a certain date. If you still do not get paid it is then time to take a firmer approach. It is better to lose a customer who does not pay than to keep supplying them in the hope that one day they will eventually pay.

Debtor control is an important task, do not neglect it. If you do not relish the idea of chasing debtors there are other ways of overcoming the problem but all of them will cost you money. Just to name a few methods that you may wish to consider are:- Factoring Services, Solicitors, Debt Collection Agencies, individual debt collectors and other debt collection services. As stated they tend to be expensive and one other drawback is that the debtor is not their customer, but yours. This can very often upset your customer but if the customer really is a liability this should not cause you undue concern.

You will need the services of a good accountant who can advise you on financial matters, offer tax services, employment costs, staff payroll and many other services you will require. It is always advisable to discuss with the accountant just what they are to do on your behalf and how often it is to be done. You must also agree fees with your accountant before committing yourself and do not forget that you can negotiate fees in most cases.

Banking for your business is a necessity which you have to arrange. It is an expensive service that so it is advisable to shop around. Find the best deals available to suit your business and circumstances even if it means changing bankers occasionally. You may wish to consider on-line banking, which the banks claim is less time consuming and cheaper than conventional banking. The type of banking that you use depends entirely on the requirements and situations of your business, but whatever they are, examine the offers and plans that the banks have to offer. Talk to your accountant and bank managers. Obtain the best deal that you can and, above all, make sure that any proposals put forward are in your interests and always query any charges which are not self explanatory.

Michael Russell

Your Independent guide to Small Business