Common sense suggests that an efficient business will have a far easier time making a healthy profit.
Accountants, therefore, are big fans of efficiency. Anything that identifies wasteful activity and replaces it with pure productivity gets our vote.
Learning from the best
In 1909, the founder of Ford Motor Company, Henry Ford, said: “Any customer can have a car painted any colour that he wants – so long as it is black”.
This desire to restrict customer choice defined Ford’s early success in the motor industry. Their production line was focused on driving efficiency, too, with factory workers performing the same task at the same workstation over and over again.
Need more inspiration? You need look no further than budget airlines when it comes to mastering efficiency. They gamble on the fact that their customers usually want the lowest price possible and know that, by driving as much efficiency as they can, prices can be reduced to aid the purchasing decision.
The same goes for budget supermarket chains who stock far fewer lines than the big-name competition and focus on own-brand products.
So, how can you identify inefficiencies in your small business?
Stop papering over the cracks
Right – time for a bit of honesty.
How often do you spot a recurring problem and simply use the same fix each time to address it?
Bodging, rather than fixing, issues within your business is hugely inefficient.
Instead, spend some time looking for the root cause, and address that instead. For instance, if you’re constantly updating your payroll and invoicing run each month and tripping over inaccurate spreadsheets, why not outsource or automate the process instead?
Make cashflow king
You’ll have heard the expression ‘cash is king’ before, but it’s true.
If your cashflow is consistently poor, it’ll have a large impact on the efficiency of your business – particularly if you’re running a small firm.
How long do you spend chasing bad payers? Accurate invoices, clear payment methods, and prompt dispatching of invoices will all help sure-up your cashflow.
With the right accounting software in place, you can automate payment chasing and ensure your late-payment interest conditions are put into practice, without anyone having to lift a finger in your business.
Flush inefficiency out of your processes
By taking a critical look at your processes, you should be able to sniff out any inherent inefficiencies.
Repetition of effort, pointlessly lengthy processes and tasks that could be automated can usually be found in any business, but the most efficient firms will address them.
Start mapping out your processes by recording them from start to finish and speaking to those involved. And remember – corporate knowledge should never be locked in the head of one employee!
One of the best ways to look after the pennies in your business and raise efficiencies is to ‘bootstrap’.
This essentially means you’ll avoid wasting money on luxuries such as fancy offices, premium business travel, and branded shirts, by instead focusing your spend on only the things that are 100% needed.
Bootstrapping isn’t for every business, but, regardless, it’s worth digging into your supply chain and any recurring supplier payments to see how much you can tighten up expenditure.
Reach for the cloud for your accounts
There’s really no excuse not to have a cloud accounting system in place for your business – no matter how small the operation.
Thanks to manageable monthly payments and incredibly ease-of-use, cloud accounting is now accessible to all.
It’ll also provide you with countless automation options to help drive efficiency in your business.
Get tax efficient
Can you be sure that you’re paying the right amount of tax? There’s a chance you’re paying too much (or too little), depending on how the business has been structured.
A leaky boat of this kind will also suffer from inefficiencies, so make sure you speak to your accountant to find out if your business is set up correctly from a tax perspective, or whether there’s anything else you can do.
Still confused about why you’re less efficient than you’d like to be? Speak to our team to find out more about tax planning, cloud accounting and anything else that could help make your business become far more productive.