THE BUSINESS WE MEANT TO BUILD

How good businesses lose their way

Chapter 19 – Twenty Days Too Late Is a Habit

During the years of Banks Consultancy, we spent far more time than should have been necessary chasing clients for the information required to prepare their financial statements, income tax returns and other reports. The requests were rarely complicated, and the information was usually sitting somewhere within the business, waiting to be reconciled, explained or simply handed over. Yet the weeks would pass, reminders would be sent, promises would be made and another deadline would creep closer. By the time the records arrived, the client was often no longer seeking advice about what might be done, but an explanation of what had already happened.

I have often wondered why intelligent and otherwise capable business owners allow themselves to reach that position. It is easy to blame the calendar, the pressure of work, a difficult employee, an unreliable bookkeeper or the demands of customers. All of those things may be real, and I would not pretend that running a business leaves an owner with great stretches of spare time in which to contemplate the finer points of administration. However, being too late is rarely caused by the calendar alone. More often, it begins with avoidance and develops through repetition until lateness becomes part of the way the business operates.

The owner does not review the figures because the figures may challenge the story being told. The adviser is consulted after the contract has been signed because asking beforehand might complicate a decision the owner has already emotionally made. Tax planning begins after the end of the financial year because talking about tax while choices still exist feels less urgent than whatever is happening today. A pricing problem is tolerated until the bank account becomes uncomfortable, and an employee issue is ignored until the relationship has deteriorated beyond repair.

None of this necessarily begins with recklessness. It often begins with one postponed conversation, one unfinished reconciliation or one month in which the owner decides that the records can wait. The business continues trading, money continues arriving and the absence of an immediate disaster is mistaken for evidence that the delay did not matter. Unfortunately, a problem does not cease to exist merely because it has not yet presented an invoice. It may simply be gathering interest, penalties, resentment or consequences somewhere beyond the owner’s immediate view.

There is a familiar expression that death and taxes are the two certainties of life. Most business owners acknowledge the tax part of that statement in theory, yet some continue to treat the tax office as though it were an unexpected visitor who has arrived without an invitation. There is indignation when the income tax assessment appears, surprise when the business activity statement falls due and disbelief when payroll obligations must be funded. The reaction can suggest that the liability was created by the accountant who calculated it rather than by the business activity that produced it.

The tax office is a creditor in the normal course of business. It may not supply stock, repair equipment or deliver materials to the door, but the liability arises from transactions undertaken by the business and obligations accepted when the owner chose to trade. Treating tax as somehow separate from the ordinary expenses of business does not make the liability disappear. It merely allows money belonging to a future obligation to be mistaken for money available to spend today.

This is where the rose-coloured glasses can become particularly dangerous. A healthy bank balance may look like success while it contains GST, PAYG withholding, superannuation, income tax and amounts required to pay suppliers whose invoices have not yet fallen due. The owner sees the total and begins spending according to the apparent abundance rather than the amount genuinely available. When the liabilities finally arrive, the problem is described as a cash-flow crisis, although the shortage may have begun months earlier when somebody confused cash held with money owned.

The head-in-the-sand approach is often caricatured as foolishness, but ridicule does little to help the person trapped inside it. Avoidance usually offers a short period of comfort, and that comfort can be remarkably persuasive when the alternative is acknowledging that the business is not performing as hoped. The owner may already suspect that margins are too low, drawings are too high or debtors are being allowed too much time. Looking properly at the records threatens to turn suspicion into knowledge, and knowledge has an inconvenient habit of asking what we intend to do next.

That is why the third pillar of Banks Consultancy spoke of dragging clients kicking and screaming to compliance. The wording reflected the frustration of repeatedly watching capable people resist responsibilities they already understood, but the objective was never to humiliate them. Compliance was not meant to be a punishment imposed by an accountant or government department. It was meant to create the reliable information from which an owner could understand the business, meet obligations and make decisions while meaningful choices still remained.

The strongest outcome was never a client being dragged anywhere. It was a client coming to understand that accurate records, timely lodgements and provision for liabilities were acts of self-respect. A person who knows what is owed, when it is due and how it will be funded is in a stronger position than someone waiting for the next notice to reveal the truth. The discipline may feel boring, particularly when compared with finding new customers, designing a new product or announcing an ambitious expansion. Nevertheless, boring information has rescued far more businesses than exciting speeches ever will.

The Discipline of Boring is not a celebration of administration for its own sake. It is the recognition that invoices, reconciliations, debtor reports, payroll records, margin calculations and tax provisions are the instruments through which a business becomes visible to its owner. Without them, the owner is not managing the business so much as experiencing it. They may feel the pace, hear the noise and sense the pressure, but they cannot reliably tell whether all that activity is creating strength or merely consuming energy.

This also matters when we speak about Constant and Never-Ending Improvement. Improvement cannot be measured against enthusiasm, hours worked or the owner’s belief that things seem busier than last year. It requires information capable of comparison, and much of that information is the same information required to prepare financial statements, tax returns and supporting reports. If the records are maintained only when a lodgement deadline becomes unavoidable, the business loses the opportunity to use them as a management tool. History may still be reconstructed, but the chance to influence it has passed.

Perhaps the better question is not why the accountant requires the information, but why the owner does not require it for themselves. The records should not exist merely to satisfy the tax office or complete an annual compliance exercise. They should help the owner understand whether prices are adequate, customers are profitable, drawings are affordable and the business is producing enough cash to meet both present needs and future obligations. When those questions remain unanswered, the problem is not simply late paperwork. The owner is attempting to steer while refusing to look through the windscreen.

A genuine “silent” partner would therefore begin with a question that may feel more personal than financial: are you truly living within your means? That question applies to the business and to the life being funded from it, because the two are rarely as separate as we like to pretend. A business can appear viable while carrying drawings that its profits cannot support, just as a household can appear comfortable while steadily consuming borrowed money. The short-term desire for more may be understandable, but the owner must eventually consider whether it remains consistent with the journey they claim to be taking.

The next question may be whether a cash-flow problem is temporary or structural. A delayed customer payment, an unexpected repair or a seasonal downturn can create pressure within an otherwise sound business. Continual shortages, rising tax debts and the need to use tomorrow’s receipts to pay yesterday’s obligations may be telling a different story. At that point, it may be worth asking whether pricing, margins, staffing, debt, drawings or the business model itself require attention. The most uncomfortable question may be whether this particular business should continue in its present form at all.

That is not a question an adviser should answer casually or impose upon the owner. The dream belongs to the person who built the business, accepted the risk and lives with the consequences. However, respecting the dream does not require an adviser to protect the owner from evidence that the journey has gone off course. Sometimes the most useful act of partnership is to hold the figures steady long enough for the owner to see what they have been avoiding. Advice offered early may preserve choices, while advice sought after the crisis has matured may be able only to explain which choices have disappeared.

This is the territory explored in 20 Days Too Late. The title is not merely about missing a particular deadline, because the deeper problem is the habit of arriving after the opportunity has passed. Twenty days too late may begin twenty months earlier with records not maintained, liabilities not provided for and questions repeatedly postponed. It is rarely one dramatic act that removes the available options. More often, it is the accumulation of ordinary delays that nobody considered serious enough to confront at the time.

The influence of How Did We Get Here becomes visible when owners express genuine shock at liabilities that should have been capable of estimation throughout the year. The influence of Dumbing It Down appears when we accept the comforting idea that we are entitled to a standard of living unsupported by what the business actually earns. Neither observation is intended as condemnation, because many of us have looked through rose-coloured glasses when the uncoloured view seemed less pleasant. The useful question is whether we are prepared to clean the lenses before somebody else is forced to remove them.

Acting early can become a habit just as surely as acting late. Regular conversations with the accountant, monthly reviews of reliable figures and deliberate provision for tax can gradually replace surprise with preparedness. Difficulties will still occur, because no amount of record-keeping removes economic pressure, unreliable customers or simple bad luck. What early attention provides is room to move, time to think and the possibility of responding before the problem becomes the only subject left on the table.

Business, like life, is not free from external pressure, and tax is only one of the obligations that arrives whether or not we feel ready for it. A business owner cannot control every event, but they can decide whether known responsibilities will be examined while choices remain or discovered only when the piper demands payment. The dream may still be worthwhile, and the road may still lead somewhere meaningful, but neither is protected by refusing to look at the signposts. Perhaps the final question is the simplest one of all: whose business is it anyway?