Tag: business performance

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Sustainability and the Humanization of Work

Sustainability and the Humanization of Work

Joanie Mann Bunny FeetFew problems in business are truly solved simply by throwing more money and resources at them.  Certainly, having the people, tools and supplies to get the work done well is a business requirement, and many organizations take a “building out” approach to addressing growing workloads and customer demand.  On the other hand, there are business owners who recognize that things can always be accomplished better and more efficiently, and that improvements in these areas can make the difference between ending up with an overburdened organization with more mass than agility, or a lean organization with the ability to sustain itself while continuously adjusting to meet changing internal and external challenges.

It is said that the only constant is change, and businesses must find a way to effectively and cost-efficiently meet changing demands and conditions in order to survive.  What frustrates many business owners is that change is generally disruptive to the business, representing a significant challenge when it comes to the re-development of internal processes and procedures.   At issue is the understanding that proven, structured and repeatable processes help to improve efficiency, yet changing conditions often require changes to these processes.  In many cases, businesses find that the requirement to structure and document activities is work that must be re-done in the event of broad changes.  Too often, the work falls by the wayside because the minute it is completed, some change comes along and renders it obsolete.  It is somewhat like the child who questions making their bed each day, as they’re just going to sleep in it again and make it messy.

There may be a solution, and a lesson to be learned, in the “kaizen” approach to change and improvement.  Wikipedia’s entry on Kaizen identifies the meaning of the Japanese-Kanji word as simply “good change”.  Similar to the English word “improvement”, kaizen does not refer specifically to any single or ongoing change.  Rather, it has come to describe an approach to business which recognizes the potential for improvement – improvement in work product, work conditions, worker satisfaction, and worker performance – at all levels throughout the enterprise.  Further, kaizen does not describe change as being broad-ranging or particularly intrusive.  Beneficial (good) change may come at any level and may be identified by almost any source.

Kaizen is a daily process, the purpose of which goes beyond simple productivity improvement. It is also a process that, when done correctly, humanizes the workplace, eliminates overly hard work (“muri”), and teaches people how to perform experiments on their work using the scientific method and how to learn to spot and eliminate waste in business processes. http://en.wikipedia.org/wiki/Kaizen

The ultimate business goals are, of course, improved productivity, product quality and profitability.  A “Kaizen” approach to business recognizes that these goals are often met through gaining the participation of the entire organization.  Whether approached as individual effort, small or large group, or via suggestion system, the purpose is to nurture the company’s human resource and help focus it towards making improvements in work environment and activities which lead to improved productivity.  After all, the most valuable asset a business has is its people.  It is logical to apply this individual and collective intelligence and source of business knowledge towards making the company better – and a better place to work.

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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Lean and Mean – Improving Sales and Distribution Performance

Lean and Mean – Improving Sales and Distribution Performance

It is surprising that, even in this world of Internet marketing and online commerce, many businesses are operating at levels far below their potential.  Reliant upon people rather than information and process, these businesses are weighted down by their legacy approach to getting things done.  They throw money and personnel at the problem, adding more “fat” to the business and making sustainability just that much harder to achieve.  The right approach, and the mantra of all manufacturers and distributors, should be to work “lean and mean”, applying technology and business principles which support agility and improved process efficiency.

The center of lean business is in operations, and includes all aspects of the “order” processing and support systems.  From the point where an order is sought, to the point of order entry, and through to delivery and service – all aspects of the operation must be addressed for the business to achieve maximum success.  Innovating in operational areas, such as in order management and distribution, can help the business rise above others in the market and create a significant competitive advantage.

What becomes challenging for many businesses is the fact that years of working in established “silos” often makes it difficult to introduce the cross-functionality necessary to support lean operations.  It is not sufficient to simply suggest that the organization work collaboratively to streamline processes from order through to service and support.  Work groups and team members must work together and adapt to delivering process improvements, following through with the actions necessary to turn the philosophy into bottom line results.  Good support is required to keep customers, and a good product is necessary to support increased sales.  No aspect of the operation stands alone, so each is necessary to participate in making end-to-end improvement.  Additionally, back-office processes must be aligned to work collaboratively where required, supporting efficient operations rather than creating unnecessary bottlenecks or delays.

The key to developing a lean and mean, high performance operation is applying the technology and principles which translate into improved profitability and customer retention.  In many cases, the same solutions which create customer “self-help” capabilities are also solutions which can address similar needs for internal business users. Ultimately, the goals are elimination of redundant or error-prone processes, establishing the sharing and secure collaboration of information throughout the organization, implementing integrated systems which allow users to efficiently perform their particular tasks, and working cooperatively with others in the supply chain to maximize the real-time capability and efficiency.

Rather than continuing to utilize basic record keeping solutions, or accounting products which aren’t prepared to address the specific operational aspects of the business, owners and managers should be looking to the tools and solutions which will help them develop the framework to support improving operational performance, turning people knowledge into sustainable business profitability.

Make Sense?

J

Accountants and Small Manufacturers: Getting in Front of the Ball

There’s a lot more to accountability in a manufacturing or inventory-based business than simply keeping track of money in and money out.  Particularly in an economy when nobody can afford to build or stock products too far ahead of demand, it is essential that these businesses have a means to not only track and manage purchasing, manufacturing, distribution and stocking activities, but to understand conditions or trends which impact the flow of materials and cash through the business.  Read more…

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Virtual CFO Services and Partnering with Bookkeepers

Virtual CFO Services and Partnering with Bookkeepers

Many accounting professionals seek to become more involved with their business clients, helping to institute the controls and establish the processes which support sustainability and higher levels of business performance and value.  Acting as the Virtual CFO to the business, these professionals use historical financial information and detailed operational data to guide their clients towards stated goals.

While this move to engage clients are deeper operational levels is a worthy effort, there is often a disconnection in the supply chain for these services.  In too many cases, there is discord or a lack of understanding and trust between the CPA and the bookkeeper supporting the daily processing of the business information.

The business bookkeeper is the person “in the trenches”, getting daily information organized and processed, reconciling accounts, and generally tasked with recording transactions resulting from business activities.  Because the bookkeeper operates very closely with the business, they are perhaps in the best position to provide insight into how operational tasks and various business functions are performed and “accounted” for.  While the bookkeeper may not have the skill or experience to design change in these systems, they are a particularly powerful source of current process information and, in some cases, represent the barrier to change.

Years ago, as CPAs removed themselves from daily bookkeeping services to focus on “higher level” work, the opportunity was created for outsourced bookkeeping services to fill the gap in providing daily book and record keeping tasks for small businesses.  Small business owners in particular need help with the management of their bookkeeping and accounting, and without the availability (or affordability) of getting this service from the accounting professional, businesses turned to the bookkeepers who stepped in to fill the gap.  Yet every year, businesses turn over their bookkeeping and documentation to CPAs who simply re-create the bookkeeping in the form of “write-up”, trusting only their own work when it comes to tax and financial statement preparation.

It would seem that there would be a naturally occurring desire of CPAs to partner with professional bookkeepers in order to provide a full service capability to business clients and eliminate the need to reinvent and write-up the information, but this is often not the case and may be partly due to the reality that CPAs are trained on accounting principles while many bookkeepers are really only trained on the use of a software product.  Too often, bookkeepers gain their education primarily based on using QuickBooks software, and “speak” the language of QuickBooks rather than “accounting” resulting with a minimized view of the bookkeeper value by the CPA.

The CPA is thinking in terms of AR and AP subledgers, while QuickBooks bookkeepers think in terms of customers, invoices, and bills to pay.  While the language of QuickBooks has been designed to be meaningful to the non-accountant user, it is this very language and presentation which has made QuickBooks both a popular small business accounting solution as well as a foundational solution for an outsourced bookkeeping offering.

Working more closely with the bookkeepers, CPAs could help their clients not only achieve a more accurate and timely accounting of activities, they could also influence areas where necessary controls should be implemented, or where inefficient processes might be improved.  Providing not just information but also direction and actionable ability, these accounting professionals are now positioned more directly to provide the CFO services businesses need.

CPAs must find a way to get past their prejudices in working with business bookkeepers, and recognize that these operators “in the trenches” could be their most useful resource – and their most powerful ally – in the supply of Virtual CFO services to the client.

Make Sense?

J

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An Educated Guess is Not a Crystal Ball – Forecasting the Future

An Educated Guess is Not a Crystal Ball – Forecasting the Future

If every business could peer into the future to see how they will perform, there wouldn’t be a need for historical data and performance benchmarking.  Unfortunately, nobody has a crystal ball, so it becomes necessary for business owners to plan for the future.  By making educated guesses with valuable information gleaned from the past, companies can establish the path they will take to growth and profitability.

Accounting professionals are great at producing accurate historical financial performance information.  The value in this historical data is only partially found in the periodic reports and financial statements generated.  The primary value, the insight delivered from this historical data, is the information it reveals about the business operation over time.  It is from this historical data that certain trends are identified, providing a basis for making the educated guesses necessary to learn how the business will look in the future.

Forecasting is very important for businesses, as it provides the framework for laying out your expectations for the business.  In essence, it is a way to (hopefully) predict what your business finances will look like in the future based on forecasted growth.  And, armed with the forecast, you can now more confidently build a reasonable plan to reach your stated business goals.  While there are myriad approaches to creating a business forecast, it makes sense to simplify the process and focus on the area you likely spend most of your time attending to: sales.  Use your sales goals and projections as the basis for establishing a forecast, setting realistic goals for the current year and for a few years after that.  Once you’ve forecast the new sales goals, you can more easily appreciate what it will take in personnel and other costs to support that growth.

Recognizing that the forecast is simply an educated guess, it is important to regularly compare actual performance to the forecast to see if the business is on the right path to reach the established goal.  If sales are not growing as projected, then the business may need to make adjustments in terms of personnel hiring and other plans to ensure that costs don’t outpace sales.  Without a path to follow, business owners will not necessarily know if the operation is “on track”, as there is no track to be on – there is nothing to measure success against.  Certainly, profitability is the goal, but it is a matter of degrees of success, and the business will not know whether it is being as successful and profitable as it might be.

Accounting professionals should help their clients create realistic forecasts, along with organizing the information and formulating a plan for the business owner to follow.  On an ongoing basis, the accounting professional’s involvement delivers continued value by helping the business owner recognize and respond to changes in the business, adjusting plans as necessary to keep the business on the right path.  And, no crystal ball is required.

Make Sense?

J

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