The dog days of August can also see trade slowing, giving some business owners more time to see what’s really going on with the running of their operation.
Big organisations perform internal audits as a matter of course. Some even insist that employees with serious responsibilities take at least two weeks off in succession so that their work can be properly checked.
But small firms can also greatly benefit from undertaking a thorough review of their records and processes to ensure that everything is being done correctly, efficiently – and honestly.
We’re not talking about statutory audits here, which are legally required in-depth checks to ensure that a company is providing accurate information and is compliant with regulations.
The Government exempted most small companies from such formal analysis in 2012 depending on their size in terms of turnover, balance sheet and number of employees. But there are some basic steps that bosses can take themselves to see what’s working in their business – and what might be improved.
And being able to demonstrate that an enterprise has undergone all of these voluntary checks and balances could put a firm in a stronger position with some lenders in the future, as well as potential customers seeking reassurance that a business works well.
Follow the money
Start by scrutinising your firm’s spending, looking at everything from the costs of utility bills, contracts with suppliers, through to business expenses and credit card statements. A proper analysis should reveal whether there are places where you’re clearly wasting money or could negotiate a better deal.
Are you paying for any services that you no longer need or use?
Have you reviewed the terms of your customer agreements recently and might you tighten these up to make them work more in your favour?
Are there simple cost-savings to be made by swapping energy supplier, or introducing more environmentally friendly practices into the workplace, such as turning off equipment at night or using energy efficient lightbulbs?
You could even look at the option of moving premises if you aren’t using all of the space that you currently have, and the lease doesn’t have long to run.
With the everyday running of an SME taking up so much time and energy, it’s easy to neglect these seemingly mundane concerns, but addressing smaller issues could mean a lot of extra cash in the bank. Ask your accountant for help if you feel that the process is too great for one person to manage.
Check internal policies and legal paperwork
Very often a company drafts its terms and conditions early on in the life of the business and doesn’t then revisit them for years. The same can be true of internal policies relating to employment, health and safety, and governance.
Some SMEs fail to put their expected ways of working in writing at all, putting themselves in greater danger of late payment, employee tribunal claims, or lost business.
The summer lull can be an opportunity to give your enterprise a thorough legal health-check, running over the company’s existing documents intended both for clients and for members of staff to ensure that they’re still relevant, fit for purpose, and compliant with current Government legislation.
Again, professional advice may be useful here, so consult a lawyer or accountant if necessary, or turn to organisations such as the Chartered Institute of Personnel and Development or the Federation of Small Businesses for appropriate guidance on employment issues and any new rules that might affect your business.
Is anything out of place?
No one wants to think that their members of staff would rip them off, especially in a small business where employees are like extended family. But, sadly, it does happen – about one in five SMEs has experienced employee fraud, according to research by the National Fraud Authority.
Firstly, you need to gain access to the company’s financial records to check the numbers, so insist that the person who handles accounting takes time off. Refusal to do so may be a warning light in itself. Other signs that things might be amiss with the company’s finances could include:
- Overstated expenses.
- Understated income or delayed accounting information.
- Changes in cashflow patterns.
- Variations in accounting ratios, such as the cost of marketing in relation to sales.
- Inventory shrinkage, which may be a sign of theft.
- Customer complaints about late notices for payments, or not receiving receipts for money paid.
We’ve given tips on how to prevent staff fraud on this blog before, and the Fraud Advisory Panel (FAP) also offers advice on how to spot and act upon dishonest behaviour. The FAP also warns that companies can be particularly vulnerable to fraudulent behaviour during periods of expansion when attention can be on building the business rather than keeping a close eye on back-office functions, so try to be vigilant at all times.
Who does what?
Consider your team and the roles that each person fulfills. A useful exercise might be to get your employees to write down a list of the tasks that they tackle on an average working day to see clearly where responsibilities lie. Then, ask yourself:
Is the way that your workforce is deployed still appropriate to the needs of the business today?
Are there any gaps in knowledge that could be holding the enterprise back? In fact, is it time to think about hiring a new recruit or two to bring fresh blood and skills into the company?
Have you got one member of staff who is responsible for several functions where it would be more appropriate – and efficient – to split out jobs between two people?
Is anyone over-worked? Most small firms need all hands on deck, but if one individual is carrying too much of the workload you could be putting him or her at risk of stress-related illness or quitting altogether due to the strain.
Finally, don’t just take your employees into account when conducting your people audit – include yourself, too. It’s easy to see where others might improve, but assessing yourself is much harder.
Perhaps you could delegate more to free up valuable time to focus on growing the company. You might be overdue to brush up your own skills, be they in management, business development, or qualifications in your professional field.
And, overall, don’t forget to take the temperature of your SME on an ongoing basis. There’s almost always room for improvement, so it’s sensible to make an internal audit a regular part of your business practice.
Willem van Lynden is director of sales and marketing at Boost Capital.
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