Why effective Management Systems are vital in your business

Why effective Management Systems are vital in your business

If I asked you to tell me the number one problem in your business, it’s unlikely that ‘management systems’ would be on the list. You may tell me about a problem employee or difficulty finding good people. You may tell me that you’re working long hours, and aren’t spending enough time with your family. Very likely, you’ll tell me that cash flow is a challenge, when you are doing well as much as when business is quieter.

However, I’d like to show you why good quality management systems go a long way to help solve those problems you care about.

As you grow your business, no doubt you have:

  • added new people to your team
  • introduced new product, service, or additional locations
  • upgraded the technology you use

And yet, challenges continue to crop up. You may find that you’re not making the money you thought you were. Or you have a tax bill to pay that you hadn’t expected or planned for. Perhaps you feel the business is over-reliant on you or someone in your team? Too often I’ve seen businesses which have substantially increased sales, while profits flatline.

What’s interesting is that these aren’t just the problems of the smallest businesses. I’ve seen large organisations where only one person knows how to price work. Where is the resilience in that? I’ve heard a commercial director say that their team should ‘just know’ what to do. Having a skill-set is one thing – working in a supportive environment where expectations about what you actually ‘do’ are well-managed is another.

So how can you overcome these challenges?

  1. Know your numbers!
    Accounting software designed with business users in mind, like Xero, now makes this task much more achievable. Regular management reports will show you what money you’re making. They’ll also help you to check that you are making money in the way you expect. We monitor our average hourly rate per customer. One of our clients tracks a single sales:labour ratio, which acts as a proxy measure of profitability. It’s vital to work out what drives performance in your business and keep a close eye on it.
  2. Make your processes repeatable, and automate where you can
    The question to ask here is this: can someone with the appropriate skill-set and training follow the process? They’ll never be another ‘you’, but can they be good enough? Better still, in this age of machine learning and artificial intelligence, can you automate the process? For instance, we use Receipt Bank to ensure that clients never have to manually enter supplier bills and receipts again. This frees up your staff time to work on important creative and productive tasks.
  3. Learn as an organisation
    Think how much you’ve learnt in your time in business! Perhaps you’ve learnt the hard way that it’s important to credit-check new customers? Is that now part of your new customer onboarding process?

Business processes can be as simple as checklists

Now here’s a fascinating example. Everyone knows that surgeons are some of the most highly educated, trained and qualified people out there. While the rest of us hope to be out of education and in work by our early twenties, prospective surgeons still have several years’ study and learning ahead. And yet, the introduction of checklists in surgery cut deaths in half. Why? They pool knowledge and help to avoid human error (yes, even surgeons are human!) Simply put, checklists get results!

Business processes should be visual

Simple kanban board: ideas, to do, doing, done
Kanban boards are used in many management systems

Does your team have a spreadsheet to-do list? Automatically colour code whole rows to highlight those which are outstanding (red), in progress (yellow) and complete (green) (Microsoft Excel / Google Sheets). Or introduce a Kanban board with Trello. Label shelves and space for tools in such a way that it’s obvious when items are missing or stock is low. Add key performance indicators, such as gross profit, to your Xero Dashboard. Map out your key processes with Draw.io, or set up an intranet with Microsoft Sharepoint or Google Sites.

Where does that leave you as a business owner?

By taking a more strategic role, you can show your team where you’d like your business to go. Knowing your numbers, ensuring processes are repeatable (automated where you can) and ensuring your organisation is learning as it grows will go a long way.

What are the big issues in your business today? How are you solving them? What management systems do you use? We’d love to hear your story.

About us

At Wessex Commercial Solutions, all our clients use Xero to help run their business. We find ways to make accounting processes easier, and provide helpful management reports, information and advice.

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