The larger your business, the more likely it is that there are inefficiencies at play. Even the smallest companies can be affected however which means that we can all benefit from taking the time to reflect on where our systems and processes can be tightened up.
Before we start, it will probably be helpful to understand exactly what we mean by ‘inefficiencies.’ In the business world, inefficiency is when you spend more time or money than you need in order to reach the same result. A poor IT system could for example put a halt to staff productivity, meaning it will take employees longer to do their job.
Next up, how exactly does inefficiency negatively impact your business?
- Research suggests that inefficiencies could be costing organisations up to 30% of their revenue every single year. If you updated your IT systems, your employees would be more efficient, you could take on more clients and you would be able to generate a higher income
- It’s a time-waster. Efficiency isn’t just measured in time and minutes. Also think about the effect it’s having on your output. A frustrated employee isn’t going to be motivated and slow systems stop you delivering your products or services in a timely fashion
- It’s a productivity killer. Imagine the frustration of having to deal with a clunky system day in and day out?
- Quality is compromised. Where there are inefficiencies, you can guarantee there are inaccuracies
How do I make my business more efficient?
One of the key principles of achieving greater efficiency is to identify recurring problems. Once you’ve done this, address the cause rather than simply applying the same hack every time.
For example, if you’re spending hours manually updating information on your payroll system on a case-by-case basis each month, you may consider investing in automating the process. Alternatively, you might decide to outsource the entire operation. Our bookkeeping services can help you do exactly this.
Taking the time to identify regular problems within your business will help to reduce long-term problems. Try to get as many people involved as possible because it’s unlikely that you’re aware of every single issue that crops up.
If there’s one thing any business wants more of, it’s money. Not only would an extra holiday be nice, your bank balance is ultimately what’s going to make or break your business.
Poor cashflow is without doubt, one of the greatest threats to the health of SMEs and it’s also an area where inefficiencies are rife.
Tighten up your processes by ensuring invoices contain all the information customers need in order to pay you quickly and easily. State payment terms clearly, boldly label your document ‘invoice’, and send them out promptly. You could even automate the process of chasing payments thanks to modern online accounting packages.
It also helps to have an established escalation process – adding interest to late payments or charging a debt recovery fee. You can charge £40 for debts worth up to £999.99, £70 for debts between £1,000 and £9,999.99 and £100 for debts above this.
Learn how to maximize your cashflow in 2019 by downloading our free e-book which is full of top insider secrets to boosting your bank balance.
Map your processes
Examining and recording processes across your business can really help to identify areas of inefficiency.
It might flag repetition of effort or bring to light that a particular task isn’t being done by the person best equipped to do it. Equally, it might suggest that some less skilled jobs could be delegated to free up the capacity of a valuable team member.
There’s also potential to highlight where terms and conditions need tightening up to clarify exactly what clients are entitled to before additional charges are incurred.
Recording your processes can also save time when it comes to bringing new staff up to speed as well as help you to avoid any dips in service when staff leave.
As a rule of thumb, you don’t want corporate knowledge locked away in the heads of very few individuals.
For further information about mapping your processes, please get in touch with us about our consultancy services.
Look after the pennies
A popular approach to financing new businesses is a concept known as ‘bootstrapping.’
It assumes that most entrepreneurs can’t resist wasting money on unnecessary luxuries such as a fancy office, posh hotels, branded baseball caps, expensive advertising campaigns and so on.
Bootstrapping might not be for you but we would certainly advise any business to carry out regular spending reviews. Be hard on yourself, too – interrogate every penny.
Look at recurring payments – do you still need that software for which you’re paying a monthly fee or that trade publication subscription? Did you shop around for a new telephone supplier or did you just go with the first deal you found to save time?
Try shaking out your supply chain too. If you’re cosy with long-term partners, you might find you’re no longer getting the best price. If this is the case, it might be time to source quotes from competitors or renegotiate with current suppliers. If you’re working with middle-men, think about options for sourcing directly.
Technology has created huge potential for savings. For example, video conferences can save a lot of money because you don’t have to travel.
You could also save a fortune on stationery and postage by going paperless and storing as much as you can in remote servers in the cloud.
Knowing you need to justify an expense also promotes discipline around spending and encourages staff to assess the potential return on investment before they flash the company credit card.
The greatest potential for efficiency when it comes to managing your finances is with cloud accounting.
With anywhere, anytime live reporting and forecasting, it enables you to make faster, better-informed business decisions. It can also save you an endless amount on processing that dreaded paperwork.
Record, monitor and forecast
When cloud accounting software integrates with stock control and point-of-sale systems, you start to build a picture of your business in data and as a result, things have the potential to get very exciting.
You can ensure you’re not carrying too much or too little stock which is a vital component of achieving true efficiency. Data can also help you to identify recurring peaks and troughs in trade so you know how much extra support you might need.
Remember, efficiency doesn’t always mean cost-cutting. Having too few staff might mean you have to turn work away or, worse, delivering a substandard experience to customers and damaging your business’s reputation.
Be tax efficient
Is your business set up to ensure that you’re not paying more tax than you have to?
A business with the wrong structure, which is failing to claim the tax relief it’s entitled to and whose owners aren’t thinking about the implications of how they go about drawing profits from the business, is like a leaky boat.
Talk to us about our tax planning services and we’ll ensure you have every opportunity to reinvest in the growth of your business.
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