Why the Answer to Greater Profits Already Lies Within your Company

14/08/2015

By Jane Ollis, MD, RIFT Accounting

All small and medium-sized entrepreneurs (SMEs) want to find ways to boost their profits. It is a universal desire driving entrepreneurs.

And most companies take the same universal route to getting there - raising prices or trying to generate more spend per customer.

Surprisingly few SMEs take a coordinated and focused approach to what is probably the best - and often the easiest way - to increase the bottom line: improving productivity.

Many business owners wrongly think boosting productivity is a complex and time consuming task, left to consultants or requiring expensive technology. This is plain wrong.

In fact, almost all SMEs already have something they can use to lift their productivity and get a hold on their future today: their accountant.

Learn to count on your accountant

Too many entrepreneurs see accountants as administrators, bean counters or pen pushers. Reactive types who spring into action when bad things are happening - telling you you’ve missed an invoice deadline or your bank balance is turning red but never warned you in time to do something about it.

This is the wrong mindset. Accounts shouldn’t be there just to process numbers blindly. Entrepreneurs should view them as allies to assist them with strategy, ideas and long-term growth plans. And, in particular, helping to find ways to boost productivity. Because productivity is not about cuts, it’s about improvements.

Accountants sit atop piles of critical information and data about your company and customers.They have reams of material and metrics that can be used to measure your firm’s performance and inform and positively influence both short and long-term growth. Why would you not use that knowledge?

Launching a mission to boost productivity is the perfect time to bring accountants closer to the heart of ‘positive’ decision making in your firm.

Use the numbers already at your fingertips

Measuring and analysing data is not the sole preserve of giant corporations. Every business can use their accounts to measure their productivity. The key is to finding something that is practical and measurable that works for you.

If you’ve never measured productivity before then start with something basic as a reference point. For instance, it could be the number of sales per employee. Once you have that then break it down with a set of easily answered questions such as:

• What’s the company average for sales per employee?• Does it vary wildly between employees or is it consistent across teams?• Do sales vary at different times of days or at different times of the month?

Working from these and other simple questions you’d be surprised what you can find out. It’s not about looking for failures, it’s about figuring out why some things work and others don’t.

You can then work with your employees and accountant to share examples of best practice or fix roadblocks that were hampering success. You also now have a set of metrics to measure against future sales and can see if your changes worked and, again, build on success and try new things where you didn’t get the results expected.

Set targets and create culture

Once you’ve measured one area and realised how simple it is to measure a metric and act on the data you find, work with your accountant to create a set of three of four measurement metrics to reference on an ongoing basis.

Other good ideas for starting points are ‘cost to serve’ or ‘cost to acquire’. Get your accountant to set a baseline using monthly accounts as a basis and then set yourself the target to improve the numbers over the next quarter.

Next, make your targets visible (at RIFT Accounting we use big wall charts) so people can see how their contribution makes a difference and reward them when they do well.

Being more productive will make the workforce a better place to work as it tends to eliminate wastage and remove tasks that are inefficient or needlessly bureaucratic. You’d be surprised at how quickly a new working culture can develop, one that inspires your team and reaps success.

What not to do

It can be tempting to increase your productivity by wielding the cost-cutting axe.

Cutting wages or hacking down the amount of capital spend may initially improve your input to output ratio - but the vast majority of the time this is a short-term solution that will only worsen your productivity in the longer game and demotivate workers.

This is another reason why it is important to involve your accountant with more than just number crunching. Having them a core part of your strategy planning or team meetings helps give them context of why certain costs are essential - especially ones that may be part of a new management strategy or new training philosophy.

Mobilise for battle

Being more productive is about doing more for less and not compromising on quality. It’s about being smart and taking the little steps that add up to huge gains. A focus on productivity keeps an SME a dynamic and rewarding place to work.

By utilising your accountant’s knowledge and skill set in your productivity mission you are benefiting your whole business. As it’s something for too few firms do, you’ll also be giving yourself an edge over many of your rivals.

Accountants are your hidden weapons in the productivity battle. Make sure you mobilise them.