Understanding the Administrative Side of Your Business
As much as any successful entrepreneur would like to spend all their time collaborating with or selling to clients, the reality is that a significant amount of time must be spent managing mundane administrative tasks.
There are many responsibilities, and each is important. Some tasks require monthly or even daily review, while others can be conducted on an as-needed basis. This article addresses seven key points that a new business owner must pay attention to. Doing so right from the start is a good way to establish habits that will ensure that management of administrative tasks consistently runs smoothly.
First, it’s important to find the right professionals to help you focus on doing what you love—running your business and taking care of your customers. Professionals who help you get your business up and running include a banker who can offer advice or tools to help you manage your money, a business attorney who can draft the necessary paperwork to register your business with the state’s Department of Corporations, an accountant to help you manage your tax liability, and a marketing or social media professional. A banker who serves as a mentor to their business customers is a valuable resource. They get to know you, your business, and the type of customers you want, and over time, can offer additional support by recommending banking or financial products or services that suit your business, as your business grows.
Second, just as important as building customer relationships is building a solid team of trusted advisors and enthusiastic employees within your business or organization. Keeping everyone focused on a common goal from the very start of the business, as well as the very beginning of the new hire onboarding process, should always be a priority.
Third, get with your decision makers to create and adhere to a schedule for daily, weekly, monthly, and annual business operations to improve your company’s time and treasury management. Everything from a weekly staff meeting to quarterly or annual tax preparation requires careful scheduling and review. Budgeting capital improvements or securing additional commercial real estate space might not be on the regular schedule. However, insightful decision makers must be aware of these needs and work them into their schedule and budget.
Fourth, track your money. To accurately project cash flow, you’ll need to distinguish between operating costs and fixed, or overhead, costs. According to Investopedia, these are some differences:
- Operating expenses are the result of a business' normal operations, such as materials, labor, and machinery involved in production.
- Overhead expenses are what it costs to run the business, including rent, insurance, and utilities.
- Operating expenses are required to run the business and cannot be avoided.
- Overhead expenses should be reviewed regularly to increase profitability.
CSB’s Projecting Your Cash Flow Calculator can help you understand whether your business is generating a positive cash flow.
Fifth, understanding your gross margin will give you a clear view of the total revenue from sales, after assessing the incurred costs of producing goods and services. This number is an indicator and will help you determine if your margin is too narrow to sustain the cost of doing business. CSB’s Gross Margin Analysis Calculator is used to capture your average sales price, average cost of goods sold, average gross profit, and then show you what your gross margin is.
Sixth, you should frequently perform income analysis, which looks at gross profit, operating income, income before taxes, and net profit. This analysis is used to determine the overall health of your business and ability to earn profits. CSB offers an invaluable tool to calculate your business’s income analysis.
Check out our administrative tasks checklist for new business owners, and for more information about understanding the administrative side to your business, please reach out to a Cambridge Savings Bank business banker today.