Category: business finance

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Workflow is Essential in Document Driven Business

The popularity and proliferation of online applications and cloud computing solutions for business has transformed how organizations manage activities, people and resources.  The Internet-connected marketplace has introduced both opportunity and challenge for businesses of all sizes, and much of this focus has been placed on the management and control of digital documents and data.

Electronic document management has been commonly used in professional services business for many years, yet has not always been viewed as an essential technology to apply in the context of organizing and structuring the processing of the document.  As clients of these professional firms continue to generate and utilize a great deal of paper documentation and written information, firms continue their reliance upon paper files, shared drives, and other more traditional methods of organizing the work, and storing or controlling access to documents.  However, key trends in the industry are causing these approaches to be increasingly burdensome for professional service firms, including:

  • Need to support multiple offices, geographically disbursed team members, and mobile workers and devices
  • Increasing use of email as a primary tool for collaboration
  • Introduction of new risk elements accompanying new technologies
  • Increasing numbers of forms and document types coming from clients
  • Rising expectations of clients and increased market competition
  • Growing need for businesses to increase earnings and profitability with fewer resources
  • Increasing requirement for knowledge management supporting sustainability, creating the ability to retain and reuse best practices and work produced

Advances in the design and underlying technology supporting many document management solutions today have delivered great capability to firms adopting electronic document management approaches.

Benefits of implementation include the ability to create a centralized, searchable documents base which includes all client-related content, including email communications as well as documents and data files. Easy search, access, collaboration, and re-use of information are enabled, and complete audit trails may be retained. Electronic document solutions also reduce physical document storage needs, reducing costs associated with managing and storing paper files, and can better serve business disaster recovery and continuity initiatives.

While today’s electronic document management solutions may address many of the challenges involved in working with large volumes and varieties of documents and data, there are few solutions on the market which address fundamental issues relating to document processing workflows and how they are impacted by various business or data-driven events, or by the availability of people or resources to facilitate the process.

The growing problem facing businesses today is the volume and variety of information which must be organized, processed and archived. The market is sold on the idea that electronic communications and record keeping will simplify things, but the reality is proving otherwise. Businesses are hoarding information at unprecedented rates and with the ability to collect and generate increasing volumes of digital data, businesses have not simplified their information processing, they have only created a greater need.

Generating and collecting data is not the issue created, nor is ultimately the archival and storage of the information. Rather, the problem created is in organizing the work related to processing this ever-increasing volume of documents and data.

Businesses dealing with documents and transaction-based activities should not only attempt to structure workflows necessary to support the various processes, but must also seek to normalize as much as possible, developing a consistent and methodical approach to the work which results in predictable and consistently high quality service delivery.

The efficiency gained through this structuring and standardization of the work allows the professional services firm to achieve a greater level of profitability for outsourced processing engagements, which are often viewed as low-margin and low-profit activities.

Make Sense?

J

Read about Using Structured Workflow to Manage Offline Clients | Intuit Accountants News Central

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Small Businesses and Performance Data – Analytics are more important than ever

Creating and keeping a competitive edge is critical to building a successful business.  Developing a plan, monitoring the plan to make sure the business remains on target, and setting goals for growth and profitability are foundations of business success.  But great strategy and detailed planning cannot ensure success because the economy and business environments are unpredictable; no amount of planning is a guarantee that bad things won’t happen and the business won’t experience challenges.  On the other hand, regularly monitoring small business performance data can reveal trends and indications that things are not going as expected, and provide a basis for making the decisions necessary to get the business back on track and regain the competitive edge.

Business owners must be prepared to make adjustments as conditions change, acting on decisions made based on business performance data.  While business analytics are more important than ever, with businesses facing volatility in financial markets and increasingly globalized competition, finding a way to approach the matter is often the biggest barrier.  The growing difficulty – the increasingly expanding problem facing business owners and their advisors – can be distilled down to three particularly noticeable trends.

An Aberdeen Group report from Nov 2011 titled “The Analytical SMB” identifies these trends as More Data, More Users and Less Time.

More Data

  1. The volume of data flowing into organizations is already high and is increasing.
    1. The data is complex
    2. The data lacks similarity (data is disparate)

The volume of information flowing in to businesses is already high, and is increasing steadily.  With all the data collection applications and tools available, and as the business seeks to gain more information and intelligence from more sources, the volume of information gathered by businesses has increased at astounding rates.  Technology has adapted to this need, allowing businesses to gather than store vast amounts of data.  To be of value, however, the data must be analyzed to find the answers to questions posed.  What technology is only now beginning to address is the complex and disparate nature of the collected data.  Coming from varying sources and in equally varying formats, data must be “normalized” and related for it to make much sense.

More Users

  1. More business decision makers in more job roles and functions are getting involved
    1. More people approaching the problem with their own “brand” of analysis

In a very small business, decisions are generally made by the owner.  This is most often due to the fact that the owner is the person who not only knows what’s going on in the business, but is generally the one doing a lot of the work.  As businesses grow and bring in personnel to manage various functions, these managers become decision-makers.  Decisions are made in businesses at all levels, and as management layers are compressed, those “closer to the action” are being handed more responsibility for the decisions impacting their areas.   Without a comprehensive and company-wide framework for data analysis and reporting, these individuals and workgroups find ways to capture and analyze the data they feel is pertinent to their requirement and within their own realm.

Less Time

  1. Timeframe for making decisions is shrinking, and is shrinking at an “alarming” rate
    1. The “velocity” (rapidity of motion) of business is increasing

It may be that, in some businesses and markets, certain decisions don’t have to be made with any great speed.  Businesses or markets of this type are tough to find these days because the Internet, information technology and connected systems have all but eliminated the effects of time and distance. Just about everything in business today moves at a rapid pace, and that means that business decisions are often demanded on-the-spot, providing little time for detailed consideration and working through the problem.   Without the tools and data providing meaningful real-time visibility into business performance, decision-makers may be able to act fast but not wisely, and are most frequently guided by their “gut feel” as to what the right move is.

Driving Small Business Analytics

Business decision makers are now recognizing the need to know more about the business and how it is operating and competing in order to effectively address the choices and decisions faced each day.   The cause for this recognition may be due to variable elements, but the conclusion reached was the same: good business decisions require business analytics to support them.

Not surprising was the report finding – that the majority of small business owners felt pressured to adopt a business analytics solution primarily due to the fact that “critical business decisions rely too much on “gut feel”.  Surprise! Other drivers listed were lack of visibility into operational metrics, the growing number of people in the business who want analytical capability, the business’s inability to identify and act upon business opportunities, and having less time to make decisions.

Steps to Get There

As with any business project, there are “degrees of success”, and the ultimate success of a business initiative requires that all parties be on board with it.  Businesses who recognize a need to improve their analytical capability, but who do not then empower their systems, processes and people, will not achieve the same result as those who do.

Focusing on the business data, it is important to address both the volume and disparity by creating formal data management practices and policies, and implementing systems and processes which assist with the intelligent capture and storage of business information.  Simply retaining the data is not useful; it must be presented and applied in a meaningful manner for it to become useful as decision-supporting information.  The value of the information increases dramatically when it becomes truly useful to the business.  Additionally, by empowering a broader framework for data collection and analysis, businesses extend the “intelligence” to others in the organization, supporting individual and workgroup efforts to make better decisions for their respective areas of responsibility.  Of course, if the information is not provided in a timely manner, its value is reduced if not eliminated (hindsight may be 20/20, but that doesn’t help you see where you going to step next).  Any approach to building business intelligence should leverage connectivity and integration to provide a timely delivery of complete information how and when it is needed.

What’s the Proven Benefit?

source: article
source: article

The obvious benefit of business analysis is that business owners are provided with data to help them understand more about the business operational and financial performance.  The real and proven benefit is that the information provides a basis for gaining insight into trends and conditions which impact performance, and which support making the necessary decisions which facilitate improvement in various business areas.

The highest level of proven benefit, according to the Aberdeen Group report, was achieved by those businesses who embraced the requirement to know more about the organization and operation, and who implemented a focused effort at building business intelligence.

Fast Facts: Best-in-Class SMBs Achieved 24% year over year increase in new customer accounts sold compared to 12% for the industry average, and 11% for the laggards.

These organizations which achieved the greatest improvement operated from real data rather than being guided by gut and emotion, enabled the entire organization to participate in the development of organizational and business intelligence, positioned themselves to identify and act on new business and market opportunities, and ensured that those who must make decisions have the information and insightful data to support making the right ones.

Make Sense?

J

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Philosophy of Process Improvement: Today’s CFO Focusing on Operations

Philosophy  of Process Improvement: Today’s CFO Focusing on Operations

There are a great many methodologies and approaches to “making businesses better” through process improvement.  From SixSigma to Continuous Process Improvement to Total Quality Management – all describe methods of measuring performance and outcomes to return intelligence oriented towards improvement.  Many of these approaches are generally applied in manufacturing businesses, because in manufacturing it’s easier to see where processes may be flawed because the process works with tangible elements.  Making corrections in a process can improve the performance of that process by reducing errors or increasing efficiency.  The truth of the matter is that every business is like a manufacturing business, and applying measurements to the various processes the business performs can reveal the secrets to improving not only process performance and product quality, but resultant profitability.

A recent article on CFO.com  titled Operations Take Center Stage, author David McCann discusses how some CFOs are improving business profitability and performance by delving deeper into operational areas of the business, and not remaining focused squarely on accounting and finance issues.

“Operations is the key to everything,” says Larry Litowitz, finance chief at SECNAP Network Security, a secure Internet-services provider. “That orientation is found most at manufacturers, but it should be at every company.”

Fiscal and financial matters are important to every business, but focusing on accounting for the end-result of business activities assumes that the work leading to the result is useful and effective.  As more attention is paid to conservation of cash, reduction of expenses, and overall profit improvement, CFOs are necessarily moving deeper into the operational aspects of the business to uncover potential not previously addressed.  In some cases, the move is more a function of self-defense and necessity than desire, as businesses increasingly compress spending on management, merging the functional roles of CIO, COO and CFO.

Increasingly, CFOs may find themselves taking on operational tasks whether they want to or not. At larger companies, the steady waning of the chief operating officer position has resulted in more operational responsibility for CFOs, recruiters say. In 2000, 47% of the 669 companies included in either the Fortune 500 or S&P 500 had COOs; in 2012, only 35% did, according to executive-recruiting firm Crist Kolder’s 2012 “Volatility Report of America’s Leading Companies.”

Some accounting professionals may believe that they don’t have the skills and experience to suggest changes in operational areas of their client businesses.  I would suggest that logic and reason are generally the prevailing factors supporting process improvement – reasoning that is often developed through simple observation.  Taking the time to understand what the business is doing at each level, and then actually observing those activities and accounting for their effectiveness and error rate, is how professionals can spend quality time in the business and uncover hidden profit potential.

Litowitz says CFOs can influence operations at a range of companies, including service-oriented businesses. “It’s really no different. The work is a set of activities,” he insists… “All these activities can be analyzed, controlled, and measured against a predetermined standard,” says Litowitz. And just as on a manufacturing floor, efficiency generates profit, justifying the CFO’s involvement.

Make Sense?

Joanie Mann Bunny FeetJ

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Does Your Customer Data Support the Value of Your Receivables? | FundingGates blog

Does Your Customer Data Support the Value of Your Receivables? | FundingGates blog

Trade Accounts Receivable (AR) represents the credit a company extends to its business partners. AR is essentially an approach to financing customers’ business operations, using the supplier company as the lender rather than a bank or other source. Particularly when markets are slow-moving and cash availability is low, trade credit tends to be what keeps businesses in business. AR is a business asset (which explains why it shows up on the balance sheet), because it is something the business has that is of value. When the business needs to get a little of its own financing, should an approach using AR as the basis be a consideration? Is it even possible?

AR “financing” means that the business trade accounts receivable are the main consideration of the lender in providing financing, where the AR is either collateral for the loan or is a factor making the business eligible for the loan. There are many types of AR-based financing, and there are still more issues to think about before trying to use AR as a financing tool.

When it comes to other assets in the business, the information about them is probably pretty well-known. Physical assets in particular don’t leave a lot of question as to their value – at least in terms of what was paid for them and then depreciated over time. Other assets, like Accounts Receivable, are a bit more difficult to value. Realistically, the value of the AR may not actually BE the book value of the AR, because not all of that money may be able to be collected. Considering that companies fail or go bankrupt or experience other events which cause them to default on obligations, there is risk connected to the AR and, subsequently, a question of whether or not it makes sense to “leverage” that AR for immediate cash.

There is research out of the Columbia School of Business (among other sources) which discusses a condition called “information asymmetry”and how it may impact the business decision to use AR financing.

Read the rest of the article on FundingGates blog: Does Your Customer Data Support the Value of Your Receivables?.

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Knowing Enough to Run a Successful Business

Knowing Enough to Run a Successful Business

If you own and operate a business, you probably want to make it successful.  Granted, success comes in many flavors, and there are also “degrees” of success, where maybe you do okay but not as well as you’d like (or not as well as your local competitor).  Running a successful business, and crafting a business with sustainability and long-term value, takes information as well as know-how.   Remember that information = power and you want to be as powerful as possible when it comes to running your business.

While today’s information technologies, mobile devices, and “everything as a service” have the capability to deliver way too much information for the average business owner to make sense of, there are a few areas of the business where investing in a little insight and reporting can make a big difference in the level of understanding you have about the business.

Rather than making decisions based on guesses or gut, business owners should use actual historic data relating to these are key areas (and key performance indicators) to help predict sales and order volumes, estimate cash flows, and forecast profitability.

Getting Customers

The “customer lifecycle” does not start when someone buys from you, it starts when they become a potential customer (often referred to as a target).  Even before someone buys, your business may expend resources to expose your brand or product to them on websites, in advertisements, and through other marketing channels.  These marketing efforts will (hopefully) result in the generation of qualified leads for the business to sell to.  Unless the business understands the costs involved and the efficiency of the marketing and lead generation efforts, it cannot understand the actual cost of getting a new customer.

The next step in getting customers is turning a qualified lead into an actual paying customer.  The business will want to keep track of conversion of leads into customers, along with sales data including total sales, number of items sold, and how items were priced.  Powered by sales performance data, business owners can learn whether or not their lead qualification efforts are working, if their products are competitive, and if the pricing is in alignment with the industry.

Producing Work

When businesses operate, they essentially produce whatever work product their business model is designed to produce – whether it is a professional service, product, logistical support or whatever.  Every business produces some type of work product.  This is the operational aspect of the business, and business owners should want to know as much as possible about how well operations are running and how effective the operation is.   This isn’t just the cost of production, (the yield expected for a given investment in materials or equipment), it is also about the quality of the product (customer satisfaction) and the quality and value of the service behind it (customer retention).

Keeping Money

Money (more specifically, cash and the availability of it) is the metric that most small business owners tend to focus on.  It makes sense, too, given that most small businesses survive based on what they have in their bank accounts.   Then again, looking at the accounts receivable and payable won’t tell the entire story, either.  Business owners need to know how quickly their customers generally pay, and they need to know how much capacity or inventory they have before needing to buy or develop more.

The message underlying this entire discussion is that fact that you can’t analyze what you can’t quantify (no information = no power), so it is essential that systems be in place to capture information from the business and its activities.   Further, recognize that it takes some skill and experience – perhaps from your trusted accounting professional – to put the information together so that it makes sense and is useful.

Make Sense?

J
Measure, Manage and Succeed.  It’s all about knowing how to speak the language of finance