small business performance – Page 17

January 14, 2014

The Productivity Paradox: Accounting for Returns on IT Investments

There has always been somewhat of a struggle between the IT department and “management”, much of the difficulty existing with the need to demonstrate clear returns on investments for IT purchases. Unfortunately, expenditures in information technology are often the result of short-term views of long-standing problems, applying “solutions” that do not fully address the requirement or which do not deliver the productivity or performance gains expected, particularly in a dynamic and rapidly changing business environment. The assumption is that a wise investment in information technology will result with improved profitability and performance. Demonstrating this on paper is not always easily accomplished.

There is a great deal of research on the subject of accounting for returns on IT investments. Some of this research describes “The Productivity Paradox”, referring to early studies on the “relationship between information technology and productivity, and finding an absence of a positive relationship between spending on IT and productivity or profitability”. [1] Previous to the emergence of cloud computing and widely available remote and mobile technologies (and now possibly even more with the prevalence of available options), businesses invest heavily in IT infrastructure and applications which deliver nominal benefit to the business when measured against the cost of acquisition and implementation. Heavy IT investments are made with little or no measurable benefit to profitability, even if operational performance improvements are created. In many cases, the difficulty in “proving” benefit from information technology investments rests with the lack of information relating to impacts in non-operational areas, such as with investors, auditors or analysts.

The early research has become a foundation for making the argument that accounting professionals should be more directly involved in determining the value and impacts of IT investments – due largely to the fact that accounting professionals are generally familiar with the variety of formulas and approaches which become relevant in measuring the effects of IT purchases. Information technology spending will result in short-term impacts, but will impress on the business over the longer view as well. With a foundation in accounting principles, valuation and analysis, and accompanied by IT knowledge and experience, management accounting benefits from an improved ability to recognize the relevance and value in IT implementations even where no direct profit improvement is visible.

Can difference in firm performance be explained by differences in IT investments? — Can differences in firm performance be explained by differences in IT investments?

Emerging technology models are having huge impacts in business capability as well as risk, and this new paradigm requires that accounting professionals apply their skills to understanding more fully the influences from and results of IT spending in the enterprise.

Having a basis for studying valuation and recognizing the good and bad of focusing on various key measurements (return on assets vs equity vs sales vs investment…) is essential in developing a “formula” for predicting impacts of and potential returns from IT spending, and solving the puzzle that is the productivity paradox.

jmbunnyfeet Make Sense?

[1] Journal of Information Systems Vol. 16; “Returns on Investments in Information Technology: a Research Synthesis”

January 3, 2014June 13, 2017

Degrees of Success: Improving Productivity and Performance through Process Automation

Few businesses use just one solution to get all their work done. In most cases, the business must at least communicate, produce information and account for financial activities – and each of these functions has a software product or service associated with delivering the required capability. While every business uses technology at some level, some businesses have more success than others in developing streamlined and efficient processes guiding the various tasks and activities performed throughout the day. Sometimes the problem stems from a lack of understanding of the importance of process automation, and sometimes it’s the software.

integrated

The success (or lack thereof) in streamlining a business process is often enabled by the tools supporting it, yet the truth of software and systems is that not everything is easily integrated and not all business workflows actually “flow” smoothly. In many cases it is left to the human user to connect the processes and keep the work flowing, creating the opportunity for missed deadlines, duplicated or erroneous data, and a greater dependency on individual worker knowledge than is good for the business.

The better alternative may be the adoption of workflow and automation tools to assist with bridging and scheduling of repetitive tasks, building the knowledgebase of process and task flow supporting business sustainability efforts and easing the burdens of training new employees. Process automation helps to improve productivity, it’s just that simple.

If the time is taken to really consider the variety and numbers of repetitive tasks employees perform throughout the day, the cost in time, lost productivity and data errors or omissions would likely add up to far more than initially expected. People tend to adapt to using the tools they are provided, and will find ways to get things done (whether it’s the most effective way or not). The end does not always justify the means, and many businesses ultimately find that it is here – where individual worker initiative and unguided action are most prevalent – that the operation fails to accomplish stated goals.

In order to create a sustainable operation with consistently high levels of production and performance, the business must establish a complete framework for process automation and support. Where existing application and software functionality is not able to meet the requirement, the business should implement specialized tools to bridge the gap and embed the process knowledge in the system.

Scheduled reporting, customer and product data synchronization, import/export routines, data maintenance routines – these are among the tasks and processes which represent the regularly-performed work that may be sucking the user productivity and performance out of the business. It’s a matter of degrees of success, and productivity improvements introduced through comprehensive process and task automation can make the difference between a little success and a lot.

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December 24, 2013

Happy Holidays from CooperMann

Ninjabread cookies in the kitchen, an appearance by the Christmas Elk, and Minty Fresh (fresh cat, not canned) looking for Frangos all clearly indicate that the holiday season is here. 2013 has been an eventful year – some would say it was “fraught with peril” while others see opportunity in change. It’s all a matter of perspective – pursuing goals and taking action rather than resting on ones’ laurels and trying to wait it out. This cloud stuff isn’t going away.

With technology and social computing adoption increasing at almost alarming rates, I can’t wait to see how 2014 goes! This certainly isn’t a time for the tech-timid, as it appears as though the nerds and geeks do rule the world (aren’t we all a little nerdly, really?).

I hope you and yours have a wonderful season.

Cheers

Read the Best of CooperMann.com from 2013

December 20, 2013

Accounting, Technology and Small Business – The Best of 2013 from CooperMann

It has been an eventful year, hasn’t it? With the NSA lurking about collecting data, innovative new approaches to information and identity theft emerging almost daily, and complete turmoil in the IT services industry challenging trusted sales and distribution models, most of us have simply become numb to the noise. Information technology is evolving at an increasingly rapid pace and the way people and businesses interact with and use technology is being forced to change along with it. It’s starting to become almost, weirdly, natural.

Much of this change can be attributed to “The Cloud”, which is not a thing or a place. Cloud has become the term which applies to just about anything having anything to do with the Internet. For technology “purists”, cloud means something fairly specific, but for normal people (no offense to the nerds and geeks, but you know what I mean), cloud applies to pretty much anything accessible via the Internet. Photos back up to “the cloud”; music gets stored in “the cloud”, websites are hosted in “the cloud”; businesses run their applications in “the cloud”, and you can do darned near anything you need (or want) to with a phone. The cloud could be some guy’s server in his basement, or it could be a sophisticated network of systems housed in secure facilities around the globe. They both qualify, sort of. The point is that mobility, Internet services, subscription access to technology, and social computing are changing how people view technology – resulting with changes not simply in how IT is purchased, but in how IT is used and applied to daily life.

There are, however, some things that do not change even if the working environment does. The accounting profession, for example, is undergoing a great deal of change, and much of it fueled by the advancements in technology and social computing. But accounting fundamentals – the “truth of debits and credits” and the good old accounting equation – remain. The basics of running a business are also unchanged, even as methods of doing business evolve and globalization of markets continues. Business fundamentals – fiscal responsibility, cash and growth management, and focus on value and sustainability – are as necessary now as every before.

With all this change and IT “advancement”, there have certainly been impacts to how and where we work. But the more things change, the more they remain the same. Good business generates goodwill and more business – that doesn’t change – and bad news still tends to spread faster than good news (much faster, given social platforms that are designed to spread the word far and wide). And when it comes down to the fundamentals – the basic and essential foundations supporting building, operating, and accounting for business – we generally find that they remain constant even as the environment in which they exist experiences change.

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Here are the top 20 ranked posts for 2013 from CooperMann.com

Posts by category – with Accounting Professionals, QuickBooks Hosting, QuickBooks Software, and Small Business being the top categories with ranking articles.

ACCOUNTING PROFESSIONALS

Small Business Owner to Accountant: Make Accounting Valuable to ME

Accounting Professionals, You’re right – your clients don’t care about the numbers.

The Language of Accounting: Disconnect between Accountants and Bookkeepers

Why Accountants and Bookkeepers Use the Cloud

Bookkeeping and Benchmarks – Getting the Numbers Right

In Bookkeeping, Accounting, and Information Technology: The Value of Outsourcing

Re-defining the role of the accountant, or going back to the good old days?

The Collaborative Online Model for Small Business Accounting Professionals

Remote access to client bookkeeping comes in many forms because clients come in many forms

QUICKBOOKS AND BUSINESS APPLICATION HOSTING

What Small Businesses Need To Know about QuickBooks and the Cloud

Intuit Introduces Changes to Authorized Commercial Host for QuickBooks Program, Introduces QuickBooks Enterprise Rental Licensing

Hosting All My Applications in the Cloud

Intuit Hosting Program for QuickBooks Website Goes Live

Cloud Computing for Small Business: It’s All About 3 Apps

QuickBooks Hosting: New Program Tier Announced for QuickBooks Hosting Providers

Managed Applications, Cloudpaging, and a New Flavor of Hosted QuickBooks

QUICKBOOKS SOFTWARE

Changing How We See Software: QuickBooks 2013 interface frustrates power users

SMALL BUSINESS

4 Rules of Thumb for Business Success

4 Rules for Building Service Customer Loyalty

December 12, 2013January 8, 2018

4 Rules of Thumb for Fiscally Fit Business

Most folks who start a new business go in to it with a rather naïve belief that a good idea, product, service and/or group of people can be successful just because their idea, product, service or people are good. Unfortunately, that isn’t’t the reality of starting up and running a business. Regardless of how great and innovative the idea is, the business only works if it is sustainable and profitable. Otherwise, it was just a great idea. For many entrepreneurs, developing an understanding of the financial underpinnings of running a company isn’t the most exciting of ideas. The compulsion is to outsource the responsibility to someone else like an accountant or financial advisor. While I completely and utterly agree that every business owner should work closely with their accounting professional and financial advisor, I also know that those very same business owners will get more value from their advisors if they have a common language to speak (business finance) and are working toward a common goal. The goal is fiscal fitness – the creation of a sustainable and profitable business. Just as physical fitness supports a healthy body, fiscal fitness supports a healthy business.

The successful business operating in this economy adheres closely to 4 main beliefs, rules of thumb perhaps, relating to fiscal management and fitness and which are generally communicated in detail using the language of business finance.

Rule 1. Plan before you start. Then plan some more. Starting a business isn’t like going to college; you’re supposed to know what you’re going to do BEFORE you start up rather than paying to explore the options. It is also very important to recognize that the plan may require some adjustments as you go along (“No plan survives contact with the enemy”), taking care to not equate focus with intractability. This plan should also include the “exit strategy”, which is really a plan for what the owner wants to ultimately get out of the effort. It could be a plan to sell out for gobs of money, to leave a legacy for the children, or maybe just to have an awesome quality of life and do what they love at the same time. Knowing what it will take to get in, get it done, and get out the way you want is all part of the plan.

Rule 2. Keep a close eye on the numbers. No, not all of them, but the really important ones. Some of these numbers have to do with the relationships between price, volume and cost. This is the stuff a business owner needs to know like the back of their hand – hairs and all. Not every business will focus on the same key numbers (mostly, but there are certainly variations), but every business owner should know what to look for. And they should be looking very frequently so things don’t get out of whack before corrections can be made.

Rule 3. Manage the cash, manage the growth, and know how one impacts the other. Cash flow and growth are priorities number 1 and 1 in business but they aren’t the same thing. Consider that reducing prices (and profits) to get more sales may work as long as the volume of sales supports the effort and generates the cash. Without the extra sales revenue to rely on, reducing profits could result in devastation (maybe sticking with the prices the way they are and not pushing for fast growth is a better idea).

Rule 4. If you must borrow, be informed and do it smartly. There are a lot of different options for borrowing money for the business, just as there are a lot of different reasons to do it. There is a great deal of research available which describes the benefits of borrowers being educated in basic financial literacy, with better financial decision-making being among those benefits. Looking for financing is kind of like choosing between the apple and the candy bar: one may promote the fitness you’re looking for while the other does not (but it looks sweet!). It’s nice to have the foundation to support knowing which one you should choose.

Building and maintaining a fit business requires an understanding of how the business works – how and why it makes and spends money, what makes it profitable and what it takes to create and support growth. While outside advisors may be available to help, the best performance is achieved when the business owner masters the essential skills required to run and grow a fiscally fit and sustainable business.

Joanie Mann Bunny Feet

Make Sense?

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

November 18, 2013November 18, 2013

4 Rules for Building Service Customer Loyalty

Every business owner knows that it’s important to retain the business of good customers, because those good customers will turn into referrals and more customers. What many business owner’s don’t know is that building customer loyalty – the repeat and referral business that keeps the doors open – takes more than producing a good product or having nice personnel. Building customer loyalty is a continuous process which involves just about every area of the business. Particularly with service-based businesses where there may be a number of variables involved with the delivery, proper information collection, management, and communication becomes the essential foundation for delivering on the promise of great service, which helps to develop loyal customers.

In a previous article titled “4 Rules of Thumb for Business Success”, I stressed the importance of creating the best business impression possible. Here are a few additional tidbits for service businesses – things the company can do to make sure that the work is done completely and correctly the first time, which is what leads to happy and loyal customers.

Rule 1. Remember that everyone in the company is essentially in a sales and service position. The customer should be able to get useful help or direction from any employee. Not that everyone in the company can do all the jobs in the business, but everyone should be willing and able to find the resources necessary to get the customer’s question answered. And it’s a good habit to try to set any necessary service appointments on the first call – it lets the customer know you’re ready to get the job done and saves them time. Too many sales teams simply answer inquiries from callers and don’t ask for the business. If you don’t ask, they can’t say yes.

Rule 2. Structure the order process to make sure that all information is captured, stored, and made available to service techs. Customer requests should be specifically noted, along with any special details or requests. There’s nothing more annoying than telling the company to watch out for something when they’re at your place, and then finding out that the tech didn’t get the memo. Also make sure that any specific work items or parts are listed on the order, making it easier for the tech to record what they do and use. All of this information should be available not just to techs, but to customer service and sales people, too. After all, mismanagement of order information is usually not the customer’s fault, yet the customer is the one who ends up not getting what they asked for. Avoiding this situation is critical to developing loyal, repeat customers. It also makes getting the customer sign-off more likely, and this signature should be captured at the work site when the job is completed (allows the billing department to get the invoice out much faster, which allows the company to get paid faster).

Rule 3. During the job, make sure customers and co-workers are informed as to the status of the work. The worst thing is to partially complete a job and leave the customer hanging – a situation that status tracking of service orders helps prevent. When the work is completed, make sure to let the customer know, and also provide observations and recommendations. Whether it’s a single job or a regular maintenance contract, always document what was done so that the customer knows exactly what work was performed. Use a checklist or cheat sheet to make sure things are done completely and consistently every time, including cleaning up and making notes about the job. Documenting things that technicians notice while at the customer location may provide the opportunity to offer more or other services to the customer, or might at least inform the customer about an issue they should be aware of. By paying attention while on-site and looking for upgrades or value-adds that might benefit the customer, service technicians can often position themselves as top sales people, too.

Finally, Rule 4, always thank the customer for their business and let them know you genuinely appreciate it. Smile, hand them a business card, and maybe even ask for a referral. If you’ve done your job well and kept the customer informed along the way, it’s likely that this customer will bring you more business both directly and through referrals and recommendations. That’s customer loyalty, and you can’t buy it anywhere – you have to build it.