Business processes – get them right and make more money
A common theme in companies we have seen recently is that where their business processes are poor they have less money in the bank and more nasty surprises than they should have.
It doesn’t matter what size your business is, you must get the processes right or you lose value.
Businesses do the same thing every day, so should business processes
Most businesses, whatever they do, are repetitive and cry out for systems and processes. These should be simple and applied consistently. They should not be side-stepped or over-ridden except in rare circumstances.
People should be accountable and responsible for their part in each system so if bottlenecks or failures occur they can be identified and the person for that part of the process can be helped, trained or replaced.
Business processes should also take place in good time. Anyone can raise sales invoices six weeks late, but getting them out of the door to clients punctually is what helps cashflow!
The accountant can get the right numbers from the wrong processes
Accountants have a number of tools to fine-tune the numbers, but those tools should be used for exactly that purpose – for fine-tuning NOT for estimating the primary numbers.
The example of this that we see time after time is accrued income. A business has not, for whatever reason, raised it’s sales invoices for the month so the accountant fills the gap with accrued income and the sales invoices are raised later.
This can work reasonably well for medium term projects but when you should be raising sales invoices each week or month then the process has to be right so the invoices are actually raised at the right time. It is not good enough for the accountant to use accrued income to save the day – no-one ever got paid for accrued income!
Business processes add value
An often used phrase is “work on the business not in the business” articulated in The E Myth, Michael Gerber’s very successful books for helping small businesses. A central tenet is that it is a lot easier to sell for a high value a business that has strong systems – essentially when a potential buyer asks how the business works all you have to do is hand over the operations manual.
So, whether you are looking to sell at some stage in the future or simply to make more money from a growing business, the message is clear – get your business processes to work every day and to work right first time.