Run a More Efficient, Profitable Business in 10 Minutes a Day

Posted by Heather Villa, CMA, MBA, MSM on November 05, 2010 in: Bookkeeping & Accounting, Tips in 10

Did you like that title? Every business owner wants to run a more efficient, profitable business. But I confess that I wasn’t entirely honest with you: The original subject line of this Tips In Ten article was going to be “Manage Your Expenses in 10 Minutes a Day”. Unfortunately, I don’t know many people who get excited about that. I was worried that some of you (I’m not naming names) would skip this article and wait for the next one. So I changed the title because that’s the ultimate reason that you want to manage your expenses in the first place – in order to run a more efficient, more profitable business. I’m going to show you how you can achieve a more efficient, more profitable business by managing your expenses in just 10 minutes a day.

As I mentioned, expense review – which is just one part of bookkeeping – is among the unsexiest of the business functions you need to do. And it’s nice to outsource it to a bookkeeper or accountant. But some of you can’t outsource it, or choose not to, and more importantly, as a business owner you should still have a handle on your expenses even if you do outsource the majority of your expense management to someone else.

I also recommend that you do this in ten minutes a day. Once in a while you’ll have expenses that will require more than ten minutes but what I’m proposing will only take ten minutes or less. So, although you might not like to manage your expenses, a ten minute “quick hit” of expense management is something you can get through. And as long as you set aside ten minutes a day, it will rarely take more than five minutes. Depending on your business, if you start now with ten minutes a day, you might get to a point where it only takes ten minutes a week… but you have to start somewhere.

The first thing you’ll want to do before you sit down for your ten minute expense blitz is to keep your expenses in one convenient location. Don’t keep them in your inbox with everything else. When it’s time for your scheduled ten minutes of expenses, you’ll spend more time searching through papers for your bills than you’ll spend managing them! Instead, try a stackable organizer and set one shelf aside just for invoices, bills, and receipts; anything that represents money that has gone out or is about to go out.

Step 1: Enter your expenses. (Duration 1-2 minutes)
This is the easiest and the fastest step: Open up your favorite bookkeeping system and enter your bills. (What’s that? You don’t have a bookkeeping system? You need to get one ASAP). This step won’t take long. The more familiar you are with the system and the more you do this expenses-in-ten-minutes work, the faster it will go. Some days you’ll input one or two expenses or nothing at all. If you’re just catching up on your bookkeeping, make this your priority before you do the next steps. But once you’re at a point where you are all caught up, and entering your expenses only takes a moment or two, then you can move on to do the rest of the expense management, which I’m sure you’ll find more interesting (and profitable).

Step 2: Analyze your expenses (Duration 6-7 minutes)
After you’ve entered the expense, you’ll still be left with pile of papers. Now it’s time to do some analysis. This might take you the full ten minutes at the very beginning (and could spill into ten minutes the next day, too, if you have a lot of expenses). Over time, you’ll end up with just a couple of expenses to manage each day and it will go very quickly.

With your pile of expenses, you’re going to analyze each one to make sure that it is helping you to run your business. So, create a chart (you can just use a piece of paper unless you want to save your work to review it in the future) and write the following columns across the top:

  • Expense
  • Amount
  • Time
  • Impact on Sales
  • Impact on Profit
  • Is there a better way?

Expense & Amount Columns: The Expense column and the Amount column are easy. You can simply list whatever the expense is. Make sure you also list expenses that don’t have a corresponding piece of paper to go with them, and list the expenses on your credit card bill as separate expenses (not as a single lump sum).

Time column: In the Time column, list the amount of time that it takes you to deal with that expense. So a lunch with a client might be an hour at the table plus another half hour of travel time. So you’d list 1.5 hours. Some expenses won’t take any time at all. Others will take a lot of your time. If you have employees and you have entered their wages as an expense that day, the amount of time that goes in this column is still whatever YOU spend. So you might spend time training them, managing them, reviewing their work, and dealing with administrative paperwork (like health forms, etc.). If you have 4 employees that you pay biweekly and you spend 4 hours each with your employees in that period, then you would write down 16 hours in the column.

Impact on Sales & Impact on Profit column: The Impact on Sales and Impact on Profit column is really simple. On a scale of 1-5 simply write down a down a number that represents what impact you feel this particular expense has on your business’ overall sales and overall profits. 1 = Not at all, 2 = Very little, 3 = Some, 4 = Noticeable impact, 5 = Great impact. Yes, this isn’t an exact science and you won’t find an accountant or bookkeeper who uses this 1-5 scale. That’s not the point. You’re not trying to replace a bookkeeper or accountant with this effort. You, as a business owner, are just trying to figure out how a particular expense impacts your business overall. Your telephones might be used as the primary way to make sales so they’d get a 5. Your lunch with a client might have an impact on a single sale but not a big impact on your business’ overall sales, so it might be a 1 (or, if they’re a big client, it might be a s high as 2-3).

“Is there a better way?” column: In this column, you are just pausing for a moment to consider if there is something you can do to manage that particular expense more effectively. In many cases, the answer will be no. In some cases it might be yes. Your sales staff might not be an expense you want to do anything about. Or maybe you want to float the possibility of switching them from a wage to a commission. Your $100 lunch with a client, though, might have been equally as effective if it was just a $60 lunch. Use the other columns – like the time it takes you or the impact on sales and profit – to be your guide. If something takes you a long time but has little or no impact on your business’ sales or profit then it might be worth outsourcing, eliminating, or reconfiguring for a more cost-effective way of doing things.

Step 3: List your to-dos (Duration 1 minute)
From your list of expense analysis, you might end up with a few to-dos a couple of times a week. Some of the to-dos will be specific things you need to act on, like “find someone to outsource my staff administrative work to” or “find out if the phone bill needs to be as high as it is” or “shop around for a new service provider”. Other things will be items you just need to keep in mind for later like “Don’t spend so much on lunches with clients.” These latter reminder-type to-dos are worth noting and I like to put reminders of them in places where they are applicable. For example, if I wanted to spend less on lunch, I might add a little “$!” to my schedule for my next client lunch as a way to remind myself to watch my spending.

Final thoughts
At first, you’ll push the 10 minute window every time; but soon, you will only have a couple of expenses to deal with everyday and this will become a fun exercise to focus you in on running your business in a more efficient and profitable way.

This isn’t a perfect science and as you read through my instructions I’m sure you thought of a couple of expenses that don’t fit the system. That’s okay. I’m not saying it’s going to be bulletproof. However, in my experience, most of my readers will find that most of their expenses will fit nicely into this analysis and the other expenses can just be dealt with on their own. This isn’t deep analysis that will replace your accountant. The purpose here is to get you processing your expenses quickly but also to compel you to pause for a moment and consider whether or not the expense has an impact on your business.

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