Cutting the Cost of Business Processes
Virtually none of your organisation’s internal accounting and business transactions actually add value for your customers. Why would any customer would be willing to pay for purchase order matching; or works order processing; or inventory tracking through your business ?. These transactions have arisen over many years as “standard” methods of financial control. Auditors make a good living trawling through transactions (it’s easy money), and years of training have programmed us not to question them.
The fact is that these financial transactions are costing your business a great deal of money and, yet, deliver no value to the customer. In one business we studied with 150 employees, 12% of their total revenue was spent processing such transactions – the staff costs of posting works orders, time sheets, goods received notes, matching purchase orders, and so on.
We’re not saying that these transactions can be completely eliminated – financial control must be maintained – but we are saying that internal control processes can be greatly streamlined to radically reduce the amount of time required to achieve the same level of financial control:
- Month end close reduced from five days to 1½ days
- Purchase order transactions reduced by 60%
- Works orders entirely eliminated
- Labour tracking reduced to a “top line” level
- Inventory tracking reduced to goods received and finished goods despatched
- KPIs reduced from 50 to 8
These results have been achieved by our clients with no loss of financial control, but a great reduction in transaction costs. Each client and each process is different, but, in general, we use a five stage approach to improve finance processes:
- Define the purpose and parameters of the process in the context of strategic objectives;
- Identify and map the process. Link process measures to the strategic objectives;
- Analyse the variations in demand and in service performance;
- Measure the flow through the process, and identify the waste and barriers to efficiency;
- Work with the process team to remove the waste and improve the process.
Finance Process Improvement is not about making people work harder or faster, it is about identifying and removing the waste from internal processes – unnecessary steps; over-complicated elements; time delays; and so on.
We will help you study and improve your business processes and we will give you the skills to keep improving after we have gone.
Improve your financial processes with Ideas into Action. Please contact us for further information, or to arrange a discussion.