Ten tips to improve business efficiency

In the current economic climate, it is more important than ever for businesses to improve efficiency and strengthen growth. Below are some tips from accounting firm HLB Mann Judd to help businesses operate efficiently.

There are a number of steps that business owners and managers can take to increase efficiencies, which should result in improved profitability for their business. These involve both reducing or controlling costs, and ensuring a better marketing focus to increase sales.

1. Key performance indicators: KPIs are those elements that the business has identified as vital to its success. They could include: sales figures; customer retention; aspects of the manufacturing process; or turnover. Calculating and reporting KPIs in a timely manner provides a snapshot of actual business performance, allowing any issues to be identified before they have a major effect on the bottom line.

2. Business plan: It’s important for the future success and growth of a business to invest the time in creating a business plan. Business planning allows a vision for the business to be created and measurable goals established so that the vision can be achieved. Benefits include: clarity and focus in the direction of the business; greater ability to make continuous improvements and anticipate issues; greater confidence in decision-making. Those who already have a business plan should review it regularly and update as needed.

3. Cash flow: Creating cash flow forecasts allows better understanding of when money is coming in and going out, so that any delays or shortfalls can be managed. Focusing on the following will help with managing cash flow:

• Debtors - invoice promptly, invoice progress payments, offer discounts for prompt payment, offer different payment options and follow up outstanding debtors
• Creditors - negotiate credit terms, take advantage of discounts, do not pay earlier than required.
• Inventory - keep accurate and timely records, replace slow-moving products, and mark down dead inventory for quick sale.

4. Customer retention: Encourage customers to keep coming back by ensuring their needs are met and providing quality service. Do what you said you would do; communicate regularly; give the customer the opportunity to provide feedback; implement a loyalty or referral program. Effective cross-selling and bundling techniques can increase the average dollar spend by each customer.

5. Best practice: If the business’s processes were developed many years ago and the comment “this is the way it’s always been done” sounds familiar, it may be time to review processes. Best practice means adopting the best ways of working to achieve business objectives, for instance by: keeping up to date with what competitors are doing and benchmarking against other successful businesses; encouraging a culture of innovation and creativity; making good use of technology.

6. Supplier arrangements: There are often opportunities to negotiate better terms with suppliers. Businesses should review current supply contracts and take advantage of any discounts for prompt payment or extended payment terms. They should also seek competitive suppliers and get comparative quotes.

7. Banking relationships: Meeting with the business’s banker to discuss current facilities and business position enables a better understanding of the terms of current facilities as well as other available facilities. For example, there may be better interest rates available, reduced fees, more convenient ways to pay, or the availability of credit to assist with cash flow.

8. Employees: Engaged employees are more productive and committed to a business, and this can have a positive impact on business performance. Businesses could improve employee engagement through: effective communication; mentoring programs; delegating responsibilities; providing opportunities for advancement; empowering employees.

9. Go green: Adopting environmentally friendly processes is good for the environment and may also lower operating costs. Strategies include: implementing paperless procedures such as electronic filing of emails or electronic billing and banking; printing double-sided and re-using scrap paper; switching off lights and computers at the end of each working day; substituting incandescent lamps with compact fluorescent lamps; installing timers or thermostats to maximise efficiency of air conditioning.

10. Productivity: There are only so many hours in a day and therefore productive days are important for efficiency and success. Mark Twain said “Eat a live frog first thing in the morning and nothing worse will happen to you the rest of the day.” Business owners and managers should develop the habit of “eating a frog” by starting on the most difficult task (or the task you are most likely to procrastinate on) and persevering until it is complete. Clean and sort the email inbox to save valuable time, write down a task list, prioritise based on importance, complete unfinished work and consider delegation of tasks to others.