Is your business looking for massive growth? Understand results? Improve administratively? You are not alone. Small businesses are constantly changing to remain competitive in the market. This constant grind requires every bit of a Company’s resources and efforts. The combination of problem management and low overhead leads to overworked and/or under-performing finance, accounting and back office departments.
Our significant small and lower middle market company experience has given us data to identify where most companies are lacking.
Below are five value-adding recommendations for improving processes and more importantly, the bottom line for small to middle market businesses:
1) Performance Reporting
Effective reporting identifies and detects trends which minimize the risk of lost opportunities and accumulated business losses.
Smaller companies struggle with timely reporting. Usually resulting from a lack of resources, old and antiquated systems and lack of defined business indicators which track performance. While monthly financial reports are a valuable benchmark, they are a lagging indicator. Every company has simple benchmarks that can be established. Start by identifying methods to monitor the most critical performance indicators – monthly financial reporting figures will never be a surprise again! Remember, it is critical to start simple – just a few metrics.
Cash is king! A cash flash report reviewed daily or weekly gives management a true snapshot of liquidity and performance. This is a quick and efficient win. Utilize the treasury or clerks to track cash balances daily.
Want to grow? Want to acquire? You need to understand where you have been as well as where you want to be! If you don’t have a budget or forecast– set one up. Assessing performance is about goals, not the prior year. Even a simple budget will allow Management to monitoring results more effectively.
Reporting platforms exist which easily integrate with most systems. But as a warning – it is critical to define the key performance indicators prior to dedicating capital, time or resources to a new platform. With reporting – keep it simple in the short-term, evolve as you understand your business.
2) Employee Engagement and Motivation
Do you motivate employees with measurable performance bonus incentives? Employees are likely to work faster and harder when there are rewards for doing so. Never underestimate the value of the almighty dollar and/or the value of recognizing hard work. Having milestones set up and motivators for your employees will boost productivity. Additionally, lack of performance compensation or bonuses could lead to turnover which leads to skyrocketing hiring and training costs.
Company-wide performance or efficiency measures drive motivation. A bonus pool which shares cash flow/earnings growth over budget between ownership and employees can be effective. Also, identify detailed measures or metrics by department or role. Some examples include turnover metrics for Human Resources, timely close or accounts receivable days for Accounting, machine hours and safety for Operations, etc.
3) Business Process Transformation
How many of your businesses are stuck in the past with employees performing an abundance of manual processes? Popular inefficiencies we identify are usually at the clerk or middle-management level. For larger – we see redundant processes in different departments or business units.
Answers such as “it has always been this way” is not acceptable in today’s business environment. Business today is about automation. Why struggle with a manual process or antiquated system when off-the-shelf systems may exist?
When prioritizing which inefficiencies to fix first, start by quantifying the number of hours saved by a changing a simple process. Then quantify these savings into dollars. This will peak the interest of stakeholders.
4) Cost Controls and Savings
Every Company wants to cut expenses. While bench-marking costs can be complex in each industry, ensure you have the basics covered.
Quick wins include exploring group purchasing plans. Group purchasing plans are a relatively easy and low/no cost to join. While savings may not always be significant, they could be incorporated into bonuses or other employee benefits. The company should be re-assessing administrative costs such as employee benefits costs, payroll system costs, phones/system/data, banking fees.
Vendors will never adjust pricing unless they are asked and you should be assessing key contracts annually.
5) Utilize Systems
As mentioned throughout this article, do not underestimate the opportunities and value you will achieve from effective systems. Small and middle-market companies struggle with utilizing systems and key data to assist them in business decision making.
Even in the environment of old customized applications – automated platforms exist which can generate key data real-time to measure performance and key metrics. Systems can replace manual processes with automated capabilities such as real-time approval queuing or data input.
While excel was once a valuable tool to automate manual processes, excel used as a processing tool can be considered antiquated and manual with the capabilities of today’s automated platforms.
Conclusion
Remember – keep it simple and achieve small wins. Small and middle market companies do not have resources to spend countless hours on changes that may not add value. Don’t over-engineer. Identify solutions that can be easily re-performed and create lasting change.
About Lake Michigan Partners
Lake Michigan Partners is an independent management consulting firm located in Chicago, Illinois with projects managed nationally. We specialize in creating value for our clients by assisting them with complex special projects. The firm provides financial, accounting, business process and risk consulting and our team works with clients to align the company’s support activities with the organization’s overall business strategy. We work as an extension of management in order to execute special projects or specialized services.
Lake Michigan Partners is focused on improving reporting, accounting and the entire overall back office. We are consultants as well as resources – interim and part-time CFO’s and accountants.
Learn about us at www.lakemichiganpartners.com