I always take a very back to basics approach when talking to clients and I’m often met with confused looks. It’s as if they’re coming to me for some magical advice and I squash their dreams with a simple statement “all businesses are the same.”
If you take it back to the basics you’ll see the same thing, money comes in (revenue), money goes out (expenses) and what you have left is profit. And when you do that, you can solve a lot of problems.
One of the most common complaints I hear from business owners is that their finance teams are making simple mistakes with big consequences — they overpaid a vendor and can’t get the money back or they underpaid one it cost them a client.
When I dig a little deeper, I usually find that they don’t really have a payables process in place. In fact, it’s haphazard at best — they make payments sporadically to the vendors that are the noisiest.
The mere mention of the process often gets me a smirk or an eye roll, but it doesn’t have to be that big a deal. In fact, the best processes are simple & consistent. For example: review your payables every Monday (pro tip: have your accounting software auto-generate the report to send to you so you don’t have to do anything), decide what should be paid, and communicate that to your finance team by Wednesday for payments to be made on Fridays.
And here’s what happens when you do that every week consistently:
- Less mistakes
- Better cash flow management
- Easier communication internally and to vendors
It’s not rocket science, it’s just simple & consistent and it can change the way you manage your business.