We little guys are not tiny versions of the big JSE listed firms. We can’t flummox our investors with nifty accounting ideas and the latest GAPP tricks. Hell, most of us don’t even have investors! We am it!

Yet the manufacturers of software persist in producing stuff that works great when you have no money worries, but is sadly lacking in the real world of entrepreneurially straitened circumstances.

A simple example is the list of aged debtors that most accounting software produces. It usually highlights the oldest debts as those most deserving of your urgent attention. So anything over 90 days is highlighted. How useful is this?

Surely, as a small business owner, a debt of R100,000 is much more important to my cash flow than a debt of R1,500 – even if the R1,500 has been outstanding for ages? So here is a simple way of prioritizing the amounts owed to you.

Simply multiply the amount owing by the days outstanding – and sort on the result.

Normally your list would look something like the following:

Add a single column to the above list as follows:

When sorted on VIP Factor it becomes:

Now simply keep collecting off the top of the list and you’re always focusing on the debts that are most critical to your future as a small business owner! When you have time left over from chasing the big bucks, you can look at chasing the paltry bits left over.

A simple spreadsheet is all that you need to make this work as most accounting programs will export their information reasonably comfortably. The real value is that it keeps your team [and you if you don’t have a team] tightly focused on getting the most value for time spent chasing. It also ensures that nothing slips out of the net.

I remain constantly astounded by how much time we spend chasing tiny bits of money that would be best written off because it simply costs too much time, effort and resource to chase. And worse, when we waste time that could be far better spent chasing the big financial icebergs that threaten to sink the flimsy canoe that most of us travel in. [And please don’t get offended by the analogy, but that’s mostly what I see when I look at how we little folk are doing this entrepreneurial thing. This email is meant to be an encouragement, not an indictment.]

Never forget, however, that it is only money! There is a heck of a lot more to life than this, so take a peek out of the window if it all gets on top of you.

© Peter Carruthers, www.petesweekly.co.za

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