Are Processes Eating Your Profits?

Bag of money

If your company’s processes and procedures stack up to be as thick as the old yellow phone book, you may be distracting your employees from delivering on company goals. Conversely,  some smaller businesses lack the needed policies and procedures that could help them run a tighter, more profitable shop.

Employee on-boarding is a prime example of something that can be either process-heavy or sorely lacking. Some organizations have week-long orientations. Others consist of showing the employee the location of their desk and the coffee machine, and they’re off and running. Most employees would likely agree that the ideal is to strike a balance. As cited in the Fast Company article “5 Ways Process is Killing Your Productivity,” the Boston Consulting Group found that in more complicated organizations, “managers spend 40 percent of their time writing reports and 30-60 percent of it coordinating meetings.”

Some procedures are more directly linked to your financial health. Inventory control is a great example. Do you use a robust inventory management system or are you managing by spreadsheets? Do you have an efficient method for quality control? Can you easily produce inventory reports for management? Collection procedures are another common opportunity for improvement. For example, if you have receivables that are accumulating and may go otherwise unpaid, a collection agency could be a wise investment. They may get 30 cents on the dollar, but that is money you might not have otherwise.

Another place to look for efficiencies is outsourcing versus in-sourcing. There is not a “right” way to make this decision– and there are many factors to consider such as cost, expertise and access to talent. This decision should be made with an understanding of the financial impact of both your choices. Many organizations simply haven’t run the numbers– and the results can be eye-opening if you haven’t. Since there are so many places to look for operational inefficiencies, try assembling a four-part advisory team that can help pinpoint inefficiencies and offer specific ways to improve. Your team should consist of your accountant, banker, lawyer and a small outside advisory board made up of a group of trusted advisors. Each will have a different take and all are interested in your long-term success.

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