Sage Africa Newsroom

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Be in control: Reasons why your (growing) small business needs formal tools and systems to win in the market

20 February 2018

By Nikki Summers, Regional Director for Sage in East Africa

As the owner of a small and growing business, the daily hustle of making money and meeting people means you don’t have much time think about formal systems or processes. You manage your team through quick chats when you see them, record customer info on spreadsheets or a notebook between meetings, and file your expenses in a box under your desk.

That’s all good and well, until you need to find an invoice from a year or two ago, or you start losing track of which customers owe you money. Doing the work manually means that you’re spending hours on work that can easily be automated. It also means that errors can creep into your processes and records.

This is why even smaller businesses can benefit from putting proper software and processes in place to manage their operations. Formalising your business processes and introducing accounting and payroll software takes a relatively small investment in time and money, and delivers a big payback in terms of productivity and reducing your risks.

Here are three signs that you should formalise your business processes:

  1. Your headcount and revenue are growing fast

As your turnover and headcount grow, so do your responsibilities in terms of legal and regulatory compliance. For example, you are required to register for VAT with the Kenya Revenue Authority once your annual turnover exceeds Kshs 5 million. Or you might need to meet the tougher demands of an external auditor if your revenues look set to exceed Sh50 million or your asset base exceeds Sh20 millions.

It will be far easier to demonstrate compliance if you have a proper business system and formal processes in place.  Quite apart from the compliance angle, a larger headcount and turnover means that managing your business in an informal manner will become increasingly impractical.

To remain in control, you’ll need to do things in a standardised and consistent manner and ensure that you can monitor financial and operational performance. Formal processes and systems are also essential to human resources functions such as performance appraisals, succession planning and career paths.

  1. Your business is getting more complicated

If you are growing into a multi-branch company with a presence in multiple countries and regions, you may need to fast-track formalising your business processes. You will also need formal processes if you need to report to external funders or operate in a heavily regulated industry. You’ll need to deliver accurate reporting, ensure consistent product and service quality, and monitor performance—all made more difficult without the right tools and processes.

  1. Your growth is accelerating

If your growth is accelerating, your company is probably starting to compete with bigger companies that have economies of scale, established systems and robust business processes. That means you may also need to introduce formal processes and systems to boost productivity, ensure staff retention and deliver your product or service with a predictable quality level.

Closing words.

Just as not having the right systems in place can slow you down, so will having a system that is too sophisticated. Often these systems are also expensive and resource intensive, so choose a solution that fits the maturity of your business. The best system is one that saves time and makes you more agile, with a direct ROI that can be seen as soon as you are live on the product.