Before you pull the trigger on your new business consider the four legs of the table

I've had a migraine/headache for 6 days straig...
Does “admin” give you a headache? (Photo credit: Wikipedia)

I met an environmentalist the other day retrenched from a large environmental nonprofit who is looking for a job with another organisation or institution because he can’t work as an independent consultant as he is hopeless without the structure of a formal environment.

Some business people find handling administration and finances, working out their sales, cost of sales, preparing a basic income statement and implementing office systems difficult to handle. These people typically say “I’m bad at admin”.

Compare the environmentalist with a small part-time publisher I recently met. He has his most of his administration with him wherever he goes. His administration is portable. When we met he was able to pull out all his costs and income worked out on a spreadsheet as well as his basic finances such as purchases and sales.

One of South Africa’s pioneer business people in the retail supermarket industry is Raymond Ackerman. He is well-known for his four legs of the table concept which include Administration, Advertising and Social Responsibility, People and Merchandise. Under administration, comes the various admin controls, finance and store development, and the mechanics of running the business. This leg is also important because it relates to return on investment and understanding how you can keep your costs to a minimum while increasing profits but at the same time contributing towards society.

Often new start-up owners find the idea-generation process and product development phases highly exciting. But once you get your business running you have to realise that administration is going to make or break your business unless you have it come under control. This may mean having a simple bookkeeping or spreadsheet system with a small file folder where you can keep all your records. Others, depending on the size of their business, might want to go for something like Quick Books or similar software for small businesses. I have seen a township trader who ran her business administration from her handbag with different compartments for purchases, cash receipts and expenses. Her bookkeeper merely needs to take all of her invoices and receipts and easily prepare her books.

But administration can be more extensive than just keeping track of finances. Administration is really about all the things that help to keep your business functioning. It can include the creation, handling, filing and maintenance of documentation and records received and generated by the business. You need to consider document confidentiality and security, archiving your records, policies, procedures and rules, recording transactions, managing your finances including cash flow and ensuring that you have the correct documentation for local, provincial or national authorities as well as the VAT and income taxes that you will be required to pay.

Whatever you do, make sure that you have a simple and logical administration and finance system that everyone in your business understands. If you want to run your small business successfully but really can’t handle your administration then perhaps you could get someone on a small retainer to assist you. At very least, you should have the assistance of a bookkeeper. Accounting firms charge such extravagantly high prices that it’s hardly the route to go for a start-up or small enterprise.

While administration could be the last thing on an innovative entrepreneur’s mind when they are involved in creating a product or service, before you pull the trigger on setting up a fully functioning small business, you need to make sure that you address the finances and controls in your business otherwise you won’t know what you’re doing.

Yes, it’s the least exciting part of your business. But knowing where you are spending your money and where your income is coming from, keeping records in place and managing your documentation makes the difference between a business that will soon be on sinking sands and one that is on solid ground.

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