How Do You Work Less But Earn More?
The answer to this question is the Holy Grail of business! It may sound difficult to achieve, but it’s actually quite straightforward.
In most cases, the answer is systems: step by step processes that can be replicated to allow your business to run smoothly and predictably… without you.
Many business owners simply resort to pushing themselves harder to achieve better results, but that strategy ultimately often leaves them burnt out and discouraged. We have to realize that the state of our business and our state of mind are deeply intertwined.
If you’re putting all your energy into your business while ignoring the other parts of your life you’ll often feel less energized, less fulfilled, and ironically less effective in your business.
I truly believe that you need to balance all aspects of your life, not just to feel better, but also because it improves your performance at work.
The highest achievers have figured out that not every task is worthy of the same amount of time and attention. They’ve discovered how to triage – an embodiment of the “80/20 principle”.
And this is precisely where systems come in: step-by-step systems or processes enable you to pass lower value tasks on to others, thereby freeing up your time, energy, and headspace – both for higher value tasks in your business and for other parts of your life.
I want to give you a simple system that you can adopt for collecting receivables (and ultimately improving cash flow). You can then use this system as a template for developing your own systems for other aspects of your business.
When an invoice is sent out, the bookkeeper enters the invoice data into an excel spreadsheet and they assign a follow-up date for 30 days later. The next step is for the bookkeeper to check the company bank account on Mondays, Wednesdays, and Fridays, and to update that receivables tracker with any payments received. This gives them a sense of which payments have come in and when.
On the 30 day follow-up date, the bookkeeper calls the client’s accounts department if the payment hasn’t been received. Most businesses don’t follow up their invoices in a timely way and money tends to slip through the cracks. This step prevents that from happening.
At this point in the system, it can split off into two paths. Was the call connected to the client or not? If yes, great! The bookkeeper then checks if the client has received the invoice. If they have, ask if there have been any issues with sending the payment. You then try to resolve them on the call.
Now for the other decision path. If they didn’t answer your call, you then enter a new follow-up date in the receivables tracker for 2 days later and run the process again.
Mapping It Out
It’s a fairly simple process to follow overall, but what makes it effective is how you can easily map it out in a diagram that guides you along at each decision point in the process. If your systems are simple enough that they follow one path, you may not need to map them out, but when possible it’s a good idea.
Using Excel or Powerpoint is typically fine as your main tool for creating systems. All you need to do is create a few boxes, lines, and arrows. You want them to be easy to understand so that you can teach it to a team member relatively quickly.
Try out this example for your receivables and adapt it to fit into your own business practices. Once you see the impact on your cash flow, you’ll be motivated to begin working on other systems in your business.
- Set up an Excel spreadsheet for your receivables (this will be your ‘Receivables Tracker’).
- Enter your invoice data as you create invoices as well as a follow-up date 30 days in the future.
- Record your bank account numbers 3 times a week to record all incoming payments.
- Follow up on your outstanding invoices in 30 days!
- If you reach your client, ask them if they’ve received the invoice and secure your payments.
- If you fail to reach them, schedule a new reminder to follow up within 2 days.
- Repeat follow ups as necessary.
Bonus: Create a map of how your system flows beginning to end.
Result You Will Achieve
Track receivables and improve cash flow in your business that can be diagrammed out and adapted to create other systems.
This article is based on an EHQ interview with the mentor.