As a business owner there are so many things to keep under control that something normally gives. And, unless you were an accountant in a previous life, its probably your money management that deserts you.
Yes, as a start-up everyone is obsessed with money and how not to spend it. You really have to 'boot strap' the company to get it going but what happens in established businesses when you finally get some income and the cash balance is looking pretty good? Let's see how it can go wrong...
Recently Kent County Council announced that they had been over-paying salaries to the tune of £1.5M over the past 4 years. How could that have happened, especially as it was public money that they were spending?
In Oct 2010 Philip Green reported his findings from a review of government spending where he found, among other things that the cost of leaflet varied from 26p to £1.31 and that departments were paying anything between £8 and £73 for a box of paper and between £86 and £396 for printer cartridges.
Both of these examples point to a lack of financial controls, care and attention. No-one seemed to worry too much as its wasn't their own personal money. But it is your money that someone else is spending, so how can you avoid similar issues in your business. Here are 8 points to consider:
1. Check direct debits, standing orders and regular payments - not just from the bank account but credit cards too. I'm sure that you will find some payments going out when they should have stopped.
2. Are you spending enough time checking the cheque or BACS run before authorising it, or are you relying on your bookkeeper or accounts department to raise the correct payments. If you don't check the cheque run, then perhaps you should be!
3. Do your payments match up to a purchase order? Who is your business has the authority to raise a purchase order - it's very similar to giving them the cash to spend. Make sure that you have the correct authority levels in place.
4. If its an invoice for goods inwards - do you really know that they have arrived and that they are in good condition. Match up the paper work to make sure you aren't paying for something that never arrives.
5. Who are you paying - do you know? A spot check on the supplier list may throw up some interesting - who can set up new suppliers - are they real?
6. Reimburse expenses promptly but only against receipts!
7. Review any contracts or long term agreements that you have in place - is it time to re-negotiate the deal? suppliers in general will happy to break a deal if you sign up for a further period.
8. If a deal looks too good to be true it probably is - watch extra's that can mount up quickly.
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