How to set up systems in your business

The Money Engineer

Ugandans are very enterprising and start several business ventures throughout their careers. However many businesses fail in less than five years. Part of the problem is lack of proper systems in place to manage growth.

There is a very busy wholesale shop near my home. The owner is very friendly with all his customers. This guy runs the shop himself. He receives the cash himself. He balances the books. He does the recruitment personally. He does customer service. He provides security. He does the shopping from Kikuubo. When he goes to church on Sunday he locks up the store. When he falls sick the shop stays closed. Clearly this business will never grow beyond the owner.

Throughout my career I have been involved in the development and implementation of various systems which are essential for proper running of a business. Here are some of the critical ones you will need in your business.

Customer acquisition. You need a system to continuously prospect for new and better customers. It may involve some form of marketing through different channels. You may use sales agents moving door to door. You could do all sorts of promotions. Bottom line is you can’t grow without getting more customers.

Product development. A business should continuously create new products and service offerings. This can be done by improving on existing products or creating totally new ones. If you own a small shop you need to keep stocking different products depending on what customers need. This might involve training the cashiers to record all the goods customers keep asking for and are out of stock. Some money has to be allocated to the development of new products.

Distribution system. Every business needs a distribution system for it’s services and products. It could be online. You may use agents or wholesalers. You may have distribution vehicles. You may have a team of sales agents. You have to develop a system to track all this activity in real time.

Accounting systems. Someone reached out to me for help in streamlining their finances for their business. The first question I asked is if he had a detailed record of all sales and expenses. The answer as expected was negative. You can’t run a business without proper books of account. As a bare minimum buy two box files. One should be labeled sales and the other expenses. Each sale you make MUST be accompanied by an Invoice. Whenever you receive cash issue a receipt. Whenever you spend get a receipt. Make sure you file the invoices and cash receipts in the “sales” box file. Expense receipts should be filed in the “expenses” file. Next buy two counter books. Label one of the files “sales” and the other “expenses.” Record all sales and expenses transactions. Record the date, name of customer/supplier, quantity of goods, description of goods, and amount. I would recommend you hire an accountant to manage your accounting system. You can also use an Excel spreadsheet to start with. Your accountant MUST give you monthly reports on sales, profits, cash position, etc.

Information systems. In this day and age you can’t manage a business using pen and paper. One has to leverage ICT. The basic thing is at least to have a computer where you can keep basic records, make reports, research online etc. I am always amazed to see a supermarket without any kind of cash register or computer. I wonder how the owners keep track of what is going on in their business. As you grow there are several online tools you can adopt. A simple solution is to use Googles docs to share spreadsheets and word documents with your team.

People systems. This is the most complicated system. You have to develop a system to attract, retain, develop, motivate, reward and fire people. A business is only as strong as its people. We usually make the mistake of hiring relatives who are not fit for the jobs. It is much better to give this relative money and hire a qualified person instead. It is very difficult to fire a relative in case they are not performing.

Performance management system. Your business needs goals or targets. You need basic targets for sales, expenses, customer growth, profitability, etc. The business performance should be tracked on a monthly basis. Your admin should prepare for you a report showing the variance between the targets and actual results with explanations for significant variations. As you grow your business will need a proper strategic plan and business plans.

Office administration. You need a system to manage the office and do admin work like keeping the office organised, writing reports, organizing meetings, buying things, etc. Hire a recent graduate and let them do the admin work.

Someone may argue that there are many rich guys in town without all these systems. I would argue that these so called rich people will not sustain their wealth beyond their generation. Most of this wealth is often squandered upon death. Plus the biggest companies in the world all have proper systems in place. Moreover you can’t build anything worthwhile without proper systems.

These are some of the basic systems your business needs. Remember as a business owner your most important job is to build your business and not to work in your business. This is the only way you will grow.