How Business Systems are important in Tax Management

Systems run the business and people run the systems”   

Michael Gerber

Yeah, I know, how does someone mention business systems and tax management in the same sentence but hang on let me explain myself.

We are creatures of processes and systems. As a toddler, you had a system, eat when hungry, play with your friends and sleep when you wanted to.


As we become older, we have been subjected to other systems in school where other people determined what we did and when we did it.

Then we became adults and boom!! it is up to us to create those processes and systems to keep order in our lives….

In business as in real life, you cannot survive let alone thrive without a conscious effort to have processes and systems around you.

When you are starting out, you are experimenting and it is ok to try out what works for your business, but at a point, once you know what works make it part of a process and your system. Document the process and make it part of your Standard Operating Procedure.

Which brings us to the need for having documented tasks, processes, and systems.

If you are in business and because you don’t invest in systems, you probably don’t have a feel of how the business is performing.

A system, as we have seen, can be defined as the routines, tasks, and processes that together make up how you run your business. Sometimes systems have been given the limited definition of ICT infrastructure as well as software, but I come from the school of thought that believes that ICT is complementary to the way a business gets things done.

For instance, a business will have a process on how you serve your customer, how you deliver products to the market, the credit period for your customers, your policies around employee relations, the onboarding process, and how you purchase among many more processes

Why are business systems important?

  1. It shows the priority of what’s important to the business

Several processes make up a system. When a business has good systems, it is generally easier to prioritize processes in order of importance. This is crucial because resources in a business are limited and as a business owner it then becomes essential to make use of those resources in getting the best outcome.

  1. Gives a clear direction and purpose to the business

Systems are created with aim of achieving specific goals. So, it follows that before you have a system you will create a clear vision and sense of direction for your business. This is vital because you don’t want to be the only one in your business who understands where you are going. A good vision that is embedded in the business will ensure all the employees of the business are aligned with its aspirations.

  1. It shows the measurable results of business while monitoring progress

A good system will have controls that enable the owner to monitor and measure results. For instance, if you must purchase raw materials for processing finished goods for your market, then you probably have a system that informs you of the number and quantity of raw materials you need to make the output needed by the market.

This helps to curb on wastage of resources and time as well as helps to adjust where there are shortfalls.

  1. It is easy to adjust and perfect processes

Once you know the business baseline, then it is possible to look out for opportunities to adjust and improve. It is possible to reduce the amount of time used to perform a task if you for instance automate. Systems allow the owner to identify gaps and seal them. It is possible to perfect a system to where it will cost your business less and it takes even less time to complete it.

  1. A good system can facilitate scaling up through borrowing or new equity

Investors and financiers usually look out for well-run businesses to invest in and lend to. One of the ways to show the health of a business and business continuity is by having working systems. Good systems are documented so that every person required to do a task is aware of what is needed from them. Likewise, investors in a business would want to see what the organization’s growth trajectory looks like.

  1. A good system Increases efficiency in the business

As a business owner with employees, you must know which tasks bring you the biggest results. If we are to use Pareto’s principle of 80/20, not all tasks are created equal. Some tasks will have a significant impact on pushing the business forward. One such task I can think of is probably sourcing new markets and opportunities.

This is not to say that the low-impact tasks should be ignored, perhaps these are best delegated to an employee to work on.

A good system can easily help in sifting out those high-impact tasks that should be prioritized.

systems in business

One of the key systems in a business is the accounting system. Here, the business transactions are recorded and reviewed.

An accounting system is one of the ways that a business owner can, quickly review the financial health of a business. Let’s talk about some of the reasons for having a good accounting system from a tax management perspective in a business.

1.   Reduces chances of being penalized as the tax payment date are diarized within the system.

Monitoring the tax-relevant days for your business as it enables you to make payments on time. Penalties and interest can be quite burdensome and so businesses should invest more in compliance.

2.  They allow you to monitor your business to avoid liquidity constraints and debt levels

The good thing about having your finances on a dashboard is that you can quickly arrest situations that lead to liquidity constraints. For instance, where your debtors are taking longer than usual to make payments you will easily recognize this from a ballooning debtors ledger. You can then take measures in following up payments, so that you don’t end up in debt, trying to meet your tax obligations.

3.  Easy to audit in case the revenue authority needs to check on your books.

Where your books are well kept it is easier to go back in time to review both financial audits and tax audits. This will save you a lot especially if you have an assessment from the tax authorities a good documentation system can easily confirm the business’s financial position.

If you are in business and you don’t a working system then, you probably don’t have a feel of how the business is performing and secondly, you may not be aware of the shortfalls of the system.

So it goes for any business, especially those started by a solopreneur and has grown, the systems in the business must be documented and reviewed, for the survival and growth of the business.

How can you create an efficient business system?

Most tasks in a business are repetitive, the tasks form processes and the processes become part of systems. I’ve listed some of the ways you can create an efficient business system.

1.  Look at your tasks and processes and group them together

When you are starting, there is probably endless demand on your time and each task seems to weave into the next in no logical order, all you know as a solopreneur is you just need to get things done. But if you review your daily tasks then you will find both patterns and opportunities to group them. Listing down the tasks and grouping them will help in making sure you exhaustively capture the tasks.

2.  Ensure the tasks and processes are well documented

The tasks need to flow one after the other, so you can use process maps that show what task feeds into the other, as well as which tasks can be done concurrently. If you can estimate the time it should take to do the task even better. Use a business planner if you can.

3.  Review tasks and processes that can be automated

After appreciating your business processes, you may want to funnel out the tasks that can be automated and if finances allow even outsourced altogether. If funds are tight, you can use the google workspace resources such as docs, spreadsheets, and even drive to save your documents. Things like receipts, purchase orders, and invoices can be uploaded there for posterity.

4.  Graduate your business to integrated software that suits your business needs

There are a million and one software solutions for every business that exists. These solutions can be very useful, in creating controls around the business and generating projections and reports that are critical for the business and its strategy the value proposition to move any business to automation cannot be overemphasized. As with all things in business, timing is key as you don’t want to burden yourself with automation costs when you are starting, but you also don’t need to wait unnecessarily when your business is ready to scale up. A balancing act is required but don’t be hesitant to jump in.

5.  Monitor and review

Continuous review and improvement, allows  your business to cut down wastage of resources and increase efficiency. I believe there is always opportunity to improve. For instance  you can improve on how your output gets to the market; cheaper and faster while maintaining the quality. look for this opportunities to improve and outdo yourself!

By now you know a good business system is as good as the people who make it, so seek to understand your business well and then document it!

To your success!

Love it? do share

Leave a Comment

Your email address will not be published. Required fields are marked *