Unfortunately, it is not enough to think up a marketable offer for a successful start-up. You must also be able to create and deliver it in the best possible way—and on an ongoing basis. To this end, it is necessary to construct the actual company as cleverly as possible. One of your most important duties as an entrepreneur is to ensure smooth and efficient operational processes.
Ask yourself the following questions:
- How do I organise premises, documents, and important work processes?
- Can I simplify every step of the way with good organisation, technical equipment and delegation of tasks to such an extent that I can use inexpensive personnel?
- Which steps do I write down so that I do not have to explain them several times?
- How do I prevent defective products from reaching the customer (quality management)?
- Always store internal and customer-related documents separately.
- Create your own compartments in the folder, which may later become separate folders for the individual areas/operations.
- File all documents immediately. In this way, you can prevent mountains of paper from accumulating, which then have to be worked through over a long period of time and lead to confusion.
- Arrange your documents chronologically, with the most recent date at the top (= commercial filing). This makes it easier to find documents, and you do not have to go through the entire folder (or compartment) when filing them.
- File important appointments (e.g. expiration or notice periods for contracts or recurring payments) in an appointments folder.
The standardisation of routine tasks can save a lot of time and energy if it is well thought out.
Many founders and (young) entrepreneurs have problems in optimally allocating the time available to them and thus making effective use of it.
As a new company, you will be judged by your customers according to whether you process your orders in an orderly manner and according to your customers’ wishes. Therefore: It is imperative that you record orders and purchase orders in writing. Write down all essential points such as type, quantity, condition, price, dates and payment agreements. Hand over a copy to the customer to prevent misunderstandings or complaints later on. You should also document the internal processing—all data for billing and calculation—in writing. The appropriate forms, checklists and work aids usually make it easier to address organisational challenges. The specialist trade retailers and trade associations have suitable documents on many topics, which you can adapt to your own needs with little effort.
Tip: Try out different form designs in your circle of acquaintances first and consider how high the expected demand is. Do not place a print order until everything is correct.
The Eisenhower principle: Not everything that is urgent is also important
First, do all the things that are important AND urgent, then the others—and then possibly delegate them. This rule contains everything you need to know to prioritise your work. Get an overview of all upcoming work and then sort it into the so-called “Eisenhower matrix”. This contains the extremes “important/unimportant” and “urgent/not urgent” on its axes. For each of the four possible constellations there are guidelines for action: You do “important/urgent” yourself and immediately, “important/non-urgent” yourself and later. Category “non-important/urgent” is usually delegated and for everything else there is resubmission or the wastepaper basket.
Post-calculation of completed orders
Once you have completed an order or project, take the trouble to check that the originally calculated time schedule was adhered to. If this was not the case, use these findings in your next scheduling. In this way, you learn to calculate your orders more accurately and save yourself a stressful day at work.
Purchasing and materials management
There's an old merchant's rule: “The profit is in purchasing.” Here are some recommendations on how to keep material costs low:
Selection of the cheapest supplier
Carry out regular price comparisons with different suppliers. In addition, many suppliers offer bait offers.
Old experience says: Those who no longer claim their early-payment discount are probably in serious trouble. With this type of supplier credit, your contractual partner defers his receivables (often this even happens mutually and is offset at regular intervals). The supplier credit is the most expensive credit, because you waive the deduction of an early-payment discount. The few percent of early-payment discount on the period of a few weeks correspond to an interest rate that is more expensive than any overdraft facility.
You should therefore pay within the period in which you can deduct a discount, even if you have to overdraw your bank account to do so. In addition to the pure interest effect, you can achieve additional savings with immediate payment: You have a good negotiating position and can negotiate discounts. And if you pay quickly, you get preferential delivery.
Bonuses, rebates, refunds
Most suppliers offer their customers incentives to buy. Those who purchase a certain annual quantity receive a bonus, a higher discount or a refund at the end of the year. Negotiate these conditions with your supplier.
Tip: For new founders there are special advantages such as commission goods (payment only after sale), longer payment periods without loss of early-payment discount and return of unsold goods after a certain period at the purchase price.
Goods and invoice control
It might sound banal: To err is human. This also applies to suppliers who might deliver incorrect, defective or insufficient goods. Sometimes too much is charged. Therefore, check the goods receipt and check whether the invoice has been issued correctly.
Purchasing the “right” material
The material to be processed must have certain properties, it must fulfil certain functions. See if you can replace some materials with simpler, cheaper products without compromising the quality of your goods.
Purchasing in optimum quantities
You can reduce costs by purchasing larger quantities, containers or lots. However, real savings can only be achieved if you actually consume these quantities. So calculate carefully.
Storage must be limited to the necessary minimum. After all, the storage space costs rent and maintenance—and unsold goods or material not yet needed are “dead capital”. Although you can usually only sell what you can show, too much of the same offer is confusing for the buyer. If possible, select suppliers who will deliver your order to you “just in time” overnight. Take advantage of ordering options via the internet or fax. Organise your warehouse clearly so that goods or material lying there do not go to waste. Professional warehouse management prevents you from losing track and buying things twice over—this is important even for small businesses (e.g. a bakery).
Every business enterprise is obliged to keep certain records from which the profit can be determined. Bookkeeping is the ongoing record of all business transactions.
Bookkeeping for small businesses
Bookkeeping is the most important area of operational accounting and provides the basis for cost accounting and calculation, planning, and statistics and shows the economic success of the company. It should therefore not be seen as a necessary evil for the tax office, but first and foremost as an instrument for managing and controlling operations. It must take account of tax requirements from a business point of view.
Members of the liberal professions and companies may keep simplified “net income accounts”. For this determination of profits pursuant to Section 4 (3) Income Tax Act (Einkommensteuergesetz), the operating income is to be recognised in the financial year in which it accrued and the operating expenses are to be deducted in the year in which they were paid.
But be careful: This simple accounting system is only suitable for those small businesses that wish to remain small. Otherwise, this variant is not recommended for business reasons because the profit is only determined inaccurately: There is no balance sheet, stock changes are not taken into account and a later changeover to double-entry bookkeeping can be expensive due to negative tax consequences.
Merchants whose business operation requires “a business operation set up in a commercial manner” (pursuant to the Commercial Code) in terms of type and scope are obliged to keep commercial (double-entry) accounts. They must regularly prepare annual accounts and update inventory records. Such merchants must also be registered in the commercial register.
Regardless of entry in the commercial register, companies that achieve a certain annual turnover or profit are obliged to keep accounts. In such cases, the tax authorities notify the commencement of the accounting obligation in writing with effect from the following financial year.
The obligation to maintain accounts includes that all business transactions (cash register, bank, etc.) are to be recorded completely, correctly, timely and in an orderly manner. The “double-entry bookkeeping” system in which each entry based a document touches at least two accounts is normally used. All business transactions are posted to accounts. For this purpose there are master account plans that have been developed for various industry sectors. A chart of accounts is the structure of the accounts required and managed for the company. There are separate charts of accounts for individual industries. The most important charts of accounts are those for retail trade, wholesale and foreign trade, industry, and service enterprises.
Double-entry bookkeeping is used to determine the profit for the period. For this reason, accruals and provisions must also be made and receivables or payables must be booked. Unlike the net income account, this method is not based on actual cash flows.
Revenue and expenditure in the cash register must be recorded not only in the accounts but also daily in a separate cash book. The actual cash balance must correspond to the records at all times (attention: the cash book must not show a calculated minus balance at any time).
Tax law also stipulates that every commercial entrepreneur must record all incoming goods separately. Anyone who regularly supplies goods to other commercial entrepreneurs for resale or consumption as auxiliary material (commercial resale) must also record the outgoing goods separately. However, the separate records do not have to be kept in special books; separate entry in the books is sufficient.
There are three ways to cover the field of bookkeeping.
1. Do it yourself
If you decide to do the bookkeeping and annual accounts yourself, use the software available on the market (e.g. Lexware Büro Easy, WISO).
2. Employ a bookkeeper
This variant is usually only worthwhile from a certain company size (20 employees or more).
3. Outsource to external providers
As an entrepreneur, you do not have to be a bookkeeper. Most founders outsource their accounting to specialised service providers. This is not expensive, especially for smaller companies, as the amount of work is still limited. Outsourcing the work is often cheaper than keeping the accounts without the necessary knowledge.
Tip: The most common and best way for small founders is: Bookkeeping by an external bookkeeper (Buchhalter), annual accounts by an accountant (Steuerberater). If you do not know anyone qualified amongst your acquaintances who can keep books for a modest sum, you should make sure to obtain several offers from service providers.
The quality of outgoing goods and services should not only be continuously monitored, but also continuously improved.
Whether car, pizza delivery service or management consultancy—whoever buys a product (good or service) usually expects quality. Quality is the actual decisive competitive factor. The idea of quality therefore plays an important role from the very first day of a company. This already starts with planning or production.
Quality assurance is the name given to the internal company process that is intended to ensure that a product meets the specified quality level. The main aim is to optimise quality. Today, the process of quality assurance is often ensured using software or other enterprise resource programmes.
How much quality is necessary?
Customers’ standards are constantly changing. Every product must therefore be regularly tested: Can material, workmanship, and design be improved? Can customer service be optimised? Are the customer orientation and know-how of the employees up to date? Does the product meet the customer requirements of today and perhaps tomorrow?
How can the quality goal be achieved?
Determining what quality a product should have is one thing. But achieving this quality goal is something else entirely. From development through production and sales to the supplier, the common quality objective must be met by all parties involved—not an easy task. But even “below” this optimal procedure you can do a lot for your quality management: The magic word here is “documentation”. Small businesses in particular can secure the know-how they have acquired by simply getting used to writing down the most important operating procedures at an early stage. When you hire your first employees and provide them with this guide, you will quickly see the value of this investment—not to mention the professionalism that such an approach signals to your new team members.
How can you “sell” your quality?
Quality-conscious companies should document to the outside world that they continuously pay attention to their product quality in accordance with recognised standards. This is demonstrated even more clearly by companies that have themselves certified by neutral experts.
In the early days of our company, a formalised organisation is not yet necessary, as we are not yet planning to employ any staff. However, important work steps are still gradually recorded. The quality of our service is initially assured by the fact that we carry out the work personally.