When to think and when to be logical

Nobel prize winning physicist Neils Bohr once said “no, no, you are not thinking, you are just being logical”.  This was said out of frustration with his colleagues inability to think through non-routine and complicated situations.  When reflecting on your business, you need to make sure that you aren’t overthinking and overcomplicating things that should be logical and freeing up your ability to think laterally and creatively for other things.

Clearly not all businesses are the same, even ones that are in the same industries or competing for the same customers.  However, there are some common things that should be approached and implemented in a logical way.  Build for clockwork so things are done on time.

Creative thinking

Obviously not all aspects of your business should be dictated by logic, flow charts, routines and deadlines.  Creative thinking will be important for things like strategic planning, marketing campaigns, social media presence, customer acquisition and retention, networking and product/service development, amongst other things.  But the focus of this piece is on the more logical side of things.

Sales and purchases

Cash is king in business, which includes electronic banking and transfers given how little actual bank notes seem to be handled these days.  You want your customers to pay on time and you want to be paying suppliers and the tax agencies on time.  This sounds logical, but it can be a hassle if things aren’t setup properly.

Your accounting systems should be designed and operated in a way that provide for clear responsibilities, which set people are accountable for, by set times during the month.  This is true for both sales and purchases.

The flow of tasks and information should be set out in a logical way and should be something that can be represented in a flow chart or similar diagram. Furthermore, it should ideally be designed in a way that prevents any significant disturbance or delay if one person is going on leave or leaving their position altogether.

For sales, steps to consider:

  • Recording and following up leads
  • Recording the conversion of a lead to a sale
  • Issuing sales invoices in an accurate and timely manner
  • Being able to track the due date for payment
  • Being able to match payments to sales invoices
  • Monitoring overdue payments, setting reminders and following up

For purchases, steps to consider:

  • Setting approval limits for purchase orders
  • Recording orders for approval
  • Approval of orders into actual purchases
  • Recording the purchase with the right date and due date
  • Authorising the payment of purchases by the due date
  • Monitoring any purchases that are in dispute or have extended payment terms

Payroll

Payroll is crucial to have running smoothly and consistently, without an over reliance on one person or a small team.  Payroll includes wages, allowances, bonuses, expense claims, superannuation and payroll tax, as well as workcover insurance at certain times during the year.  With workplace agreements and Awards in play as well, it is not to be taken lightly.

Outsourcing payroll is a common consideration due to the complexity of the factors mentioned above.  That certainly helps things run smoothly and depending on the size of the business and management team, can free up valuable resources. 

Taxes and duties

Although tax and duty can be a bitter pill when running a business, particularly in the first couple of years, it is a necessary obligation for doing business here.  But when the taxman comes to your door, you don’t want it to look like a rummage sale.  This is another area where you want logical and stable processes, as well as a clean understanding of your obligations and when they’re due.

Knowing what basis of GST the business is registered for will affect when the GST on sales are due and GST on expenses are claimable.  The size of payroll will determine the frequency of PAYG withholding payment obligations and whether or not payroll tax is due.  In time, income tax instalments will be due either quarterly or monthly.

Timely reporting

Reporting results is important to do on a regular and timely basis. Month or quarter end reports are important to keep track of progress and to monitor what’s happening against KPIs and budgets.  

Much like the ongoing payments, it’s important to have logical systems in place that benefit from other aforementioned processes, so the right people have the right responsibilities and the right due dates.

Accru Melbourne has an established team that can assist with building, implementing and monitoring a variety of business information systems, including conducting reviews and recommendations on existing systems. 

Feel free to reach out to us here if you would like to discuss further.

About the Author
Daniel Arnephy
Daniel is our technical expert for all your taxation needs. His diverse network and client base allows him to continuously build his knowledge and analyse every situation he is faced with an experienced outlook.
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