Business Process Improvement

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During 2010, Canadian companies appear to be emerging from “survival mode” from the worst recession in a lifetime. Top line growth seems to be happening from a combination of organic growth, launching of new products / services, and business acquisitions. At the same time, growth in the bottom line is being supported by ongoing and continuous improvement in productivity occurring in some cases through investments, and in other cases through “good ole” fashion cost containment. The latter is a discipline that is often the least exciting and often times the most tedious of functions within organizations. However, without this ongoing discipline, costs can quickly spiral out of control.

In the current economic environment, it is has been very challenging for companies to increase prices to customers, in fact most customers expect prices to remain the same, or decrease. For survival’s sake therefore, it has never been more important for companies to monitor costs, and seek ways to “stretch the dollar” – getting more value for each dollar spent, and saving money whenever possible.

Ongoing cost savings don’t have to be gargantuan. Smaller incremental improvements, if done continuously, can be equally effective.  In both cases, they will avoid the need for draconian measures when things come to a head, due to lack of controls.

Excel spreadsheet applications are a good way to implement smaller incremental improvements. Excel spreadsheet applications are prevalent throughout industry, but most employees only have a basic knowledge of its use. They know enough to perform the routines of their particular jobs, but not enough to significantly enhance their productivity. For most (non-manufacturing) companies, employees are at the same time the greatest asset, and the greatest cost. Therefore, ensuring that staff are sufficiently trained and have the requisite skills to perform their tasks efficiently is one way to improve operational efficiencies.

Reviewing business processes within an organization is a time consuming and often “politically” charged process – employees are often reluctant to adopt change. Furthermore, during their very busy days, operational staff lack the time (and energy), and often expertise and objectivity required to critically review the way work is being managed, to determine if best practices are being followed.

That’s where external resources can assist. For instance, over the years working as a consultant and financial professional, I have reviewed hundreds of operational functions. More often than not, Excel based solutions have been implemented, which have really improved efficiencies (and accuracies for that matter). Please contact Edelkoort Smethurst Schein CPA’s LLP and go after the “low hanging fruit” with Excel applications to improve your business operations.

I discussed Excel training recently with Mr. Kevin Moloney, of DKM and Associates. Kevin’s company provides Excel training services to companies and has become very adept over the years in pinpointing and implementing solutions. His advice to companies looking to upgrade Excel skills is this…don’t hesitate with this investment…it is probably the least costly and quickest way to improve employee and organizational productivity.

Many times business improvements can only be achieved with the use of specialized software applications, which may be linked to, but are generally beyond the capabilities of Excel spreadsheets. It is often a question of debate – should the software application be tailored to the business process or vice versa? At first glance, it would be obvious that the business processes should be understood in their current state, and then a plan for improvement to follow. (Mapping the processes using Microsoft Visio or other flowcharting is useful, because for most people “a picture is worth a thousand words”. It also ensures that all salient points of the process are documented and understood).  However, unless the business process is very basic, it may be necessary to “customize the software application”, to align with the optimal business process. This can be very expensive. For very large organizations having the resources and scale to cost justify this, it may be possible to do so. Realistically, for most companies however, there comes a point where the business process will more or less need to fit within the software application. Take heart – this in of itself will usually be a huge improvement over the manual, or less than ideal process, that it replaced.

Once again, external consultants can provide the requisite time and expertise to assist with these changes. Yes, consultants charge fees for these services, but it’s important to look at the end result, and determine if the ongoing cost savings justify the investment. As businesses continue to expand, even if companies can hold the line on head count with these productivity improvements, it will be money well spent and earned many times over.

Business Process – Key Controls
A further benefit of business process reviews and improvements is the identification of internal controls. When I refer to internal controls, I am referring to the various controls that organizations have in place, such as proper segregation of duties, authorizing transactions etc, all of which are generally designed to prevent or detect errors or fraud, and ensure financial statements are produced accurately and timely.

Publicly traded companies in Canada are acutely aware of the work (and sometimes pain) that is required in this area as part of the ongoing CEO / CFO certifications (Bill 198 aka C-SOX). Many public companies are using this to their advantage – identifying business improvement opportunities as an adjunct to the review of key internal controls – creating a “win-win” situation. For privately held companies and other organizations, the review of key controls is every bit as relevant. Key controls can ensure that business processes are designed in such a way that transactions are processed within the prescribed limits of authorization. As part of business process reviews, it’s also a good time to review internal controls.

I hope this helps. For further information, and to discuss ways in which we can assist, please contact Edelkoort Smethurst Schein CPA’s LLP.