The Importance of Office Administration

The Importance of Office Administration

importance-of-effective-administration

Streamline Your Success with Effective Office Administration

An often overlooked yet critical aspect of business management is office administration, it’s the backbone of any successful business. However, this can be a challenging area to manage effectively, particularly for smaller businesses - with less infrastructure, resources and standard operating procedures than larger firms, it’s no wonder that employers often overlook the topic.

Poor record-keeping, fraud, non-compliance with corporate legislation and low profit margins all threaten the stability of these businesses and can lead to financial losses and ultimately total business failure if not managed properly.

Paperwork, paperwork.. and more paperwork!

When it comes to organising your paperwork, accurate record-keeping is essential for any business. Local authorities may need access to certain documents at short notice and it’s critical for compliance that you have easy access to everything that you need. It also creates an audit trail for internal and external auditors. Ineffective administration can cause serious problems within your business, stemming from any one or more of the following:

  • Loss of opportunities in terms of time spent on paperwork instead of other tasks.
  • Internal errors or lost documents.
  • Difficulty finding relevant documents for internal and external audits.
  • Higher overhead expenses from manual processes that could be automated.
  • Decreased oversight of project finances, budgets and overall business performance.
  • Late payment schedules. If you’re a primary contractor this means your subcontractor relationships will suffer and your late payments will have a knock-on effect for their business. For subcontractors this means payment for your materials could become overdue, affecting your ability to access credit in the future. Not to mention damaging relationships between you and your suppliers.
  • Miscommunication among team members leading to internal errors or missed deadlines.
  • Compliance issues with government regulations.
  • Fines and other penalties due to improper documentation management.

By contrast the benefits of effective paperwork management include: 

  • Effective cost management due to accurate tracking of finances and materials.
  • Increased efficiency with streamlined processes and automated systems.
  • Improved accuracy for better customer service.
  • Enhanced profitability with decreased overhead expenses.
  • Greater financial visibility into current projects, budgets and overall business performance.
  • Streamlined workflow for faster completion of tasks.   
  • Easier compliance with government regulations.

As you can see, the benefits of employing effective document management processes far outweigh the efforts required to put relevant procedures in place. 

The real question however is, why are you doing this?  Why are you investing time at this level?  There are many opportunities to manage this work.  Hire an admin officer or borrow a virtual one.  Go a step further, take advantage of free online project management and automation tools. You’d be surprised at how many of your manual processes can now be automated, sometimes even with free and open-source tools, all available online.

The problem with low margins and earnings through volume

Low margin projects can have a major effect on a business’s profitability. If you price your work too low, you may attract more buyers, and you may be more competitive but it can sometimes make it difficult to cover just your operating costs and even your ability to generate adequate personal earnings.

What you are doing here is competing.  But competing against who and for what purpose?  There are two places where you want to be playing.  It is either at the low margin end or the high margin.  Whichever you choose you need to reframe from competing to winning.  More about this later.

At the low margin end you have plenty to think about.  If you don’t have time to invest in supplies, you run a risk on any last minute needs to complete a project.  Low margins can create cash flow problems for smaller businesses if you don’t have sufficient volume.  

Low margin is a volume game.  How do you know you are winning here?  Here’s a clue, it’s not doing more than your competitor. Winning is about getting your unfair share of the volume in the marketplace.  There are many tools you can employ to help you work out what that special number is.  Do the work and find out what turnover at what margin gets you the profit you want.  That is set by you.  For example, you have worked out that $20m in revenue at 15% margin, gives you the profit you want.  Now you go to market and make that happen.  That’s how you know you are winning or not.  

Here's another tip.  A high margin play is doing the exact same process.  Can you see the math?  $20 million in sales at 15% is the same as $15 million in sales at a margin of 20%.  You might say you won’t win any work at that margin because you will be too costly, but the beauty is you don’t need more sales, you need better customers, and less of them.  Go find them.

Why you should raise your prices?

Being cheaper than your competitors can be useful for attracting buyers and this is more often the case when the market is tight.  More often than not this strategy is counter productive.  The trouble when you compete is you don’t know what you’re competing against.  Dodgy builders for example, they are cheap and quality is a problem.  Are you competing against that?

Selling and pricing is an interesting area of psychology.  Lower prices will signal a different message to different buyers.  High prices signal something else.  Remember people buy on emotion and justify their decision on logic.  Price is pitch to the audience you want to target.  Get that target right.

Criminal & Civil Non-Compliance

As much as I dislike discussing this topic, it is an area of failure and must be understood because it’s the only way you stay away from these problems.

Civil

Misrepresentation by a director or another officer of the company. Including providing false information to investors. This may be in relation to the financial statements of the organisation, or other matters such as directors’ salaries or business plans. 

Failure to exercise due care and diligence when managing or carrying out the duties associated with their role. The law says that directors must take reasonable steps to ensure that they make informed choices, and that these decisions will not cause harm to the company in any way.

Breaches of directors’ duties under Corporations Law, such as: failure to act honestly or in good faith for the benefit of all shareholders, failure to declare conflicts of interest, or trading while insolvent.

Breach of fiduciary duties by a director or officer, meaning they fail in their duty to act in the best interests of the company rather than for themselves personally. 

Breach of disclosure requirements, such as insider trading laws where a director gains an advantage by using confidential information about a company which is privileged or otherwise not generally available to others.

Criminal

Business fraud is a serious, ongoing issue for businesses across the globe and research through the years has consistently shown that fraud is one of the most commonly cited reasons for total business failure, bankruptcies and insolvencies of small businesses within the construction industry. 

Effective office administration is critical in ensuring compliance with regulations and reducing the risk of fraud from within the business. Internal control systems, audit reports, and accurate financial record-keeping can all be used to monitor business capital. All of the above will provide you with greater oversight and improved control. Implement internal control systems to adequately and reasonably monitor employee activities with the intention of detecting irregularities, and preventing any abuse of company resources.

Internal control methods

  • Yearly risk assessments to identify and mitigate risks related to business fraud
  • Separation of duties between staff members
  • Provision of adequate employee supervision (I’m not talking micromanagement but your employees should have access to an immediate line manager who provides adequate supervision)
  • Yearly external audits to help identify any potential fraudulent activity

Other forms of criminal non-compliance with corporate law include:

  • Insider trading: The use of confidential information belonging to another person or organisation to gain an unfair advantage in trading, resulting in personal gain through investment related activities. Insider trading can result in severe consequences for both businesses and individuals.
  • Bribery: When money or other non-financial favours or other incentives are provided with intent to influence a person's decisions relating either directly or indirectly with the company’s business activities. Bribery is prominent in the construction industry due to the nature of the industry’s operation and the lucrative contracts involved.
  • Tax evasion: Deliberate non-payment or underpayment of taxes, in this context, the taxes of your business. Tax evasion can take various forms such as failing to report all income or claiming false deductions or credits. It’s a serious crime that can result in fines, penalties, and even imprisonment. It is important to note that tax evasion is different from tax avoidance, which is the legal use of deductions, credits, and other tax strategies to reduce tax liabilities.


Effective office administration is just one aspect of a larger framework for maximising your business’s potential, but it’s a crucial one. 

There are, of course additional moral and ethical reasons for financial compliance in addition to the reasons mentioned above, and it’s worth remembering that the activities of your business, including what it does (or fails to do) can have a significant impact on your business partners, suppliers and your clients.  

It’s important for you to be aware of how to effectively manage office administration so that you can apply it to your own business and reap the benefits that it can bring. Not only will the advice and information above help you to avoid fines and penalties, but it’ll also ensure that you're conducting your business ethically and with the utmost integrity.

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