Last fortnight we challenged you to look at your own role and how you were performing in your business. This fortnight we challenge you to review your Systems and Processes.

If you want your business to provide you with more discretionary time or you want to build your business to provide you with more profit you need to ensure you have systems and processes. One of the more famous examples of a business run entirely on processes is McDonalds. These stores can be run by teenagers who have no business experience at all. Why? Because of the system. McDonalds processes are clear, concise and very detailed. There is a process for everything - right down to how to flip the burger. But possibly one of McDonalds best processes is the ability for the store to know their numbers.

Let's take a look at an example for the small business.

Does your business supply Credit to Customers? If so then you have what we Number Crunchers call Debtors Days. What does this refer to? It is the number of days on average that it takes for you to collect your debts. If your sales for the year are $3 million and it takes you 90 days on average to collect your debts then you will have $740,000 owing to you from your customers on any given day! How many of you could do with some of that cash in your bank account! But what is the impact of this? Let's assume you don't have any stock sitting on your shelves for the purposes of this example you just buy the stock as and when you need it. You complete the work for your customer and invoice them at day 1. Your supplier provides you with the goods needed to complete the work for your customers and also invoices you at day 1. Your supplier gives you 30 days to pay their account. And your customer pays you at day 90. That means you are paying for the goods 60 days before your customer is paying you!

Imagine if it only took 45 days on average to collect your debts. You would only be owed $370,000 from your customers at any 1 point in time and you would only need to fund 15 days of negative cash flow before your customers paid you. What would you do with the additional $370,000 in your bank account? Would you use some of this money for Tax Planning Strategies to reduce your overall tax bill? Upgrade some of your equipment? Reduce some of your debt? Pay yourself more? If you borrowed the additional $370,000 to fund the negative cash flow days reducing your debtors days from 90 to 45 would result in an Interest saving of $27,000! That is $27,000 less to the bank each year!

So what does this have to do with Systems and Processes? The only way you will reduce your Debtors Days is to have a process for collecting cash from your customers. Your process may involve Phone Calls, Letters, Interest to customers on overdue payments or a Debt Collection agency handling accounts over 60 days for you. The main thing is having a process. We have just looked at 1 process inside your business and have not only saved Interest Costs to your business but also improved your business cash flow.

What other Systems and Processes could you review in your business?