As a founder, you’ll likely delegate to a service provider at some stage so you can effectively run your core business business activities.
Your service provider might be an accountant, marketing agency, designer, a lawyer or someone else.
What you should delegate is up to you.
However, most business gurus would agree that for efficiency and productivity reasons, you should start with non-core business activities.
In a rush to find your answer? No worries, jump ahead.
What you should delegate is up to you. However, most business gurus would agree that for efficiency and productivity reasons, you should start with non-core business activities.
And what exactly is non core?
Non-core tasks are the ones that you don’t have expertise to produce in-house regularly. And, even if you do, they cost you too much time and money to learn and perform and are therefore not worth keeping in-house do you need to delegate them.
For the purposes of this article, we’re dealing with service providers only.
Now, you’ll want to stay away from a black box service providers and I’ll explain why below.
A black box service provider will deliver the outcome you want, but may not readily give you visibility of the workings behind the outcome.
And, if they do give you the workings, its an additional charge, hard to check over and just a pain to manage.
They may be accountants, marketing agencies, lawyers and… really anyone else that’s supplying you with a service.
A classic example is an accountant that may ask you to put your expenses into an excel spreadsheet, uploads the numbers to their system and tells you how much to pay the tax office for your BAS without giving you the workings, unless you ask for them.
Further, you may not have ready access to your financial reports on an ongoing basis unless you pay for a report to be pulled or built from the accountant’s system - whatever that is.
I don’t like blackbox service providers because they increase your business risk.
Here’s my list:
Even if you delegate, you are responsible and liable for how your business is run.
And, this responsibility and liability applies regardless of whether you are running your business as a sole trader, company, partnership and trust - the 4 Australian business structures you can choose from.
Let’s look at responsibility under each business structure.
A sole trader is legally responsible for everything. They are personally liable.
Similar to the sole trader structure, each partner is liable because the partnership is not a seperate entity.
For those of you running a company, here’s what the Corporations Act 2001 says about delegation.
Under section 198D, directors are able to delegate their powers to either:
And, the delegation must be recorded in a minute book.
However, while delegation is possible, the director remains responsible for the exercise of the power as if they power had been exercised by that director themselves: section 190 Corporations Act.
There are some exceptions to this, these are listed below:
If you operate your business as a trust, the trustee is legally responsible for its operations.
Here’s the ideal outcome:
You’ll want to either be confident with the processes you are delegating or know the right questions to ask the person to which you are delegating tasks. That’s how to reduce delegation risk.
Here’s a checklist that you can apply for delegation to reduce delegation risks
Formal legal action should always be your last resort because its time consuming and expensive. However, if you do need immediate relief to stop or get your service provider to do something, you may want to get legal advice about an injunction which can help you do this.