When it comes to the smooth operation of any organisation, clear and concisely documented business processes are crucial. In today's ultra-competitive and highly regulated business environment, it is imperative that business process documentation is readily accessible to all employees and stakeholders within an organisation.
Businesses with outdated, poorly written, or difficult to access process documentation are exposed to a great deal of risk which can ultimately negatively affect their business. These problems can appear in many forms such as missed deadlines and opportunities, frustrated and demotivated employees, and the risk of non-compliance. All of these can slow growth and incur increased business costs.
Efficiency means making the best use of your resources. This refers to being able to produce more for less money and with a lower level of waste. You can also make day-to-day decisions without making costly errors. In this article, we'll explore why business efficiency matters and why you should look to focus on improving your existing processes.
Different types of business efficiency
An organisation's business processes provide a blueprint for achieving its goals. To achieve consistency and reliability, efficient business processes separate common business activities into distinct, repeatable tasks. Therefore, the need for streamlined, efficient, and adaptable business processes shouldn't be overlooked.
There are many ways finance teams can quantify the efficiency of a business. Here are some of the metrics commonly used to make efficient improvements through the reduction of wasted resources.
Financial efficiency measures how well businesses convert operations into profits or how assets are used to generate income. Common measures include overall profitability, fixed asset turnover, inventory turnover and accounts receivable turnover.
Return on investment (ROI) measures business efficiency by reviewing the return on investments made by the business. For example, how much revenue was generated from how much capital.
Workplace productivity measures the output of your employees against the hours and days worked. This is heavily influenced by the software and equipment used. For example, the pandemic saw a surge in companies fast-tracking digital transformation projects to the Cloud to improve workplace productivity.
Process efficiency oversees internal processes to review what presently is or isn’t working so that processes can be optimised accordingly.
Operational efficiency measures core business processes such as those used in manufacturing. For example, a chocolate factory may decide to bring things in-house for full control or alternatively introduce outsourcing of chocolate packaging to reduce onsite costs.
Eco efficiency measures the impact your business has on the environment. With the race to Net Zero, sustainability has become an increasingly important factor for finance teams looking for ways to reduce costs, boost green credentials and ultimately, save the planet.
Consequences of inefficient processes
Time wasted on manual processes
Like the title states, it’s still common for finance teams to carry out many processes manually. Be it number crunching on an Excel spreadsheet or trying to compile a report, these manual processes often replicate work already created by someone else.
This is both time consuming and can lead to mistakes being made due to human error. Although it’s not possible to eradicate all manual processes, CFOs should look to identify the most time-consuming manual processes and introduce simple ways to automate them to free up their teams’ time for value-adding projects.
Complex processes causing confusion and inaccuracy
On the other hand, complex processes often lead to non-adoption by staff or errors consequently. In addition to the slog of manual processes, businesses that use long-winded and complicated processes are contributing to time being wasted by staff figuring out a difficult way of completing tasks that can be simplified.
Outdated processes slowing down business activity
All too often, businesses have outdated processes in place which may have been efficient 2 years ago but are no longer fit for purpose today. These outdated processes end up costing organisations time, money and resources in the long run.
Unable to access or find information
If there isn’t a single source of truth easily accessible to staff, it can delay tasks, decision-making and often lead to mistakes if all the information required isn’t obtained. This is especially critical when it comes to financial reporting in which all pieces of the puzzle must be in place to form an accurate overview.
Failure to comply with regulations
Finance functions continue to face a growing number of regulations and rules with which they need to comply with. But if their organisation is unable to clearly provide the financial data required to demonstrate compliance and meet regulation requirements, this can result in fines and criminal charges on the back of internal or external audits carried out.
Inability to change and adapt
Operating in fast-paced and growing markets where acquisitions and mergers alongside new products and services unfold requires a proactive and agile approach in processes to meet new requirements. Organisations that are reactive in these scenarios often struggle to meet new requirements due to inefficiency in updating and publishing revised processes in a timely fashion. This often leads to miscommunication amongst staff, jumbled up processes and can ultimately result in the sinking of acquisitions or products before they’ve had a chance to swim.
Benefits of using the Cloud to target business inefficiency
Adaptability to change
If the pandemic taught organisations anything, it’s that the constant need to adapt to change is not going anywhere. That aside, changes in the future may become necessary because of market changes, the emergence of new ways of working or the introduction of new regulations. Having a robust Cloud accounting software solution in place facilitates processes which are designed to be flexible and can be changed with agility to suit new requirements at minimal costs.
Boost in workplace productivity
The Cloud can facilitate the automation of a lot of repetitive manual tasks within existing finance workflows. By eliminating bottlenecks, introducing automated processes for financial reporting and ensuring that your team has access to a single source of truth hosted in the Cloud all become contributing factors to a boost in workplace productivity. By working through inefficient processes, this also allows finance teams to spend more time on value-adding activities as the main support functions are handled.
Human error becomes a thing of the past
The adoption of Cloud accounting software plays a key role in the creation of better-designed, executed and monitored processes which can help reduce the risk of fraud. It also reduces the risk of negligence caused by human error to ensure accurate decision-making. Your execution quality can also be maintained by increasing the accountability of each department in the organisation to provide the correct figures for budgets etc.
Accurate processes mean you don’t have to reinvent the wheel
Having automated processes implemented in the Cloud ensures that each task is executed the way it was planned and designed. Identical problems are addressed the same way and there is no need to reinvent the wheel, even if roles do change. Exceptional situations and responses can also be clearly defined to ensure they are handled appropriately.
Measure processes from start to finish
In a business context, processes are simply ways to coordinate people, skills, capabilities, and behaviour with other systems and resources to drive the right business outcomes. All processes in the Cloud can be measured end-to-end and compared to expected results which helps to manage people and processes.
Cloud accounting software provides reporting and analytical tools for making accurate executive decisions. This means that you can streamline processes and quantify how these processes are helping your organisation optimise its workflows.
Identify employee strengths and skill gaps
As all processes in the Cloud are optimised for efficiency and monitored from start to finish, it can help to identify skill gaps in employees. When a process always gets stuck in a particular step with a particular person, it might be a red flag for an unskilled or inexperienced worker. This commonly occurs within finance teams where employees are not fully aware and trained in certain protocols.
Whereas when a particular step in a process is always quick in execution and error recovery, it is a sign of good employee skills and performance. This then provides CFOs with an overview of their finance teams’ strengths and areas where they could receive additional support and training as required.
Stay on top of compliance and regulation requirements
The finance function needs to stay on top of their responsibilities when it comes to meeting regulation requirements and understanding the introduction of new legislations such as Making Tax Digital. The Cloud makes it possible to implement regulatory requirements quickly, which prevents delays in compliance and any associated fines.
Increase customer and stakeholder satisfaction
The Cloud makes it possible to bring people and technology together in a way that improves communication and increases customer satisfaction. This is thanks to leaner processes boosting workplace productivity which in turn gives finance teams an increased capacity to respond more swiftly to customer and stakeholder requests for proposals, build solutions faster and customise documents as required.
How can Cloud computing improve business efficiency?
Cloud technology has revolutionised the way organisations operate on a day-to-day basis. Which is why it goes without saying that the greatest potential the finance function has when it comes to efficiently managing businesses finances is through Cloud accounting software.
Here are some ways the Cloud can be leveraged by finance functions to improve business efficiency over time:
- Automate manual processes to save time and free your finance team up to focus on value-adding tasks that require human involvement.
- See the big picture and guide business strategy by having a clear view of business performance.
- Inter-connect data on a real-time basis to improve business efficiency and productivity.
- Easily summarise outstanding purchase orders with regularly updated commitment reporting.
- Ensure cash flow is continuous by matching goods receipts to purchase orders easily and efficiently.
- Reduce credit risk by managing all aspects of the credit management lifecycle.
- Make better decisions by knowing the value of every asset within a business by having all financial data in one location.
Achieve business efficiency with Advanced Financials
Robust Cloud accounting software solutions like Advanced Financials provide CFOs and finance teams with a means to streamline, automate and optimise their business processes to ensure they are efficient and bring value to the organisation.
Driving digital transformation through the adoption of Cloud accounting software empowers your finance team to clearly map the relationships between processes, departments, systems, rules, regulations, risks and objectives, across single or multiple locations and makes them easily available via a web browser to all relevant staff and stakeholders.
With integrated modules for Financial Management, Reporting and Dashboards, Document Management, Purchasing Management, Project Management, Inventory Management, Asset Management and Expenses Management, Advanced Financials can give you a clear view of the bigger picture of finance processes to help you manage your entire business from a single screen and source of truth.
For further information on improving your business process with Advanced Financials, get in touch with one of our experts today.