In Archive

Our team has assembled a collection of advice on streamlining operations, reducing costs, and improving business in uncertain times. If you’re in need of business improvements, these are some great places to start:

Finance

1. Offer finance education for sales and operations. Executives often take for granted everyone’s understanding of basic financial principles and how spending impacts the bottom line. However, most operations and sales personnel will privately admit wanting to know more about basic accounting and finance—they just don’t know who to ask. A large oilfield service company rolled out a web-based “Accounting 101” training for sales and field service personnel, which helped field teams better understand how their decisions impacted the bottom line. After the first few months of training, field managers were able to help save the company thousands of dollars.

2. Streamline customer invoicing. Ensuring invoices are accurate and sent quickly is key to managing cash flow. Organizations waste time creating a customer invoice by seeking unnecessary approvals, manually entering data, and not using current systems to automate the invoicing process. A large energy services company was using multiple spreadsheets across Operations and Accounting to produce a single customer invoice. They realized the inefficiency and worked together to create a single customer invoicing spreadsheet to be shared between Accounting and Operations. They were able to improve accuracy and deliver invoices to customers three days faster.

3. Reduce invoice approvals. Organizations waste a lot of time on unnecessary or duplicate approvals for spending money—and most approval steps are made after the company has already committed to the spending. An oilfield services company frequently required the purchase of expendables (gloves, safety glasses, helmets) on the job site. Field managers would make the purchase under a company purchase agreement, then they were required to have Regional VPs approve the invoices. This was a waste of Regional VPs’ time and caused payment delays to vendors. The organization reviewed its approval policies, eliminated the steps, and used monthly financial reviews to hold field managers accountable for spending.

4. Rationalize bank accounts. Large global organizations notoriously have hundreds of bank accounts to support diversified business operations. The more bank accounts an organization has, the more difficult it is to manage cash flow. A large manufacturing company had separate accounts for each country in which they sold products for each division. Every week, the treasury group had to manually extract cash transactions for more than 50 accounts. They reviewed country-specific regulatory requirements and found that 42 accounts could be consolidated into a single banking relationship. The 42 accounts were moved to a single bank, allowing the company to automate the interface of bank transactions into their SAP ERP system. This improved cash flow and eliminated manual efforts to gather cash transactions.

5. Use purchasing cards. Managing vendor invoices can be tedious. Think of the 80/20 rule—20% of invoices require approval, and 80% of invoices are small amounts that don’t require additional approvals. It’s the small invoices that bog down AP departments. A mid-sized manufacturing company moved all non-purchase-order payments to a purchasing card. Each plant manager had an American Express card for small purchases. One invoice to American Express replaced thousands of smaller ones, allowing the company to reduce AP contractor fees and receive rebates from the bank as additional savings.

6. Outsource payroll. Keeping up with local, state, and federal payroll regulations and taxes is challenging, particularly for those with employees in multiple jurisdictions. Having the internal expertise and time required to process payroll and manage a payroll system can be a burden. A mid-sized service company was faced with losing in-house knowledge when two key payroll team members retired. The company was able to quickly migrate payroll to an outside provider without losing expertise or having to replace staff internally. Today, companies such as ADP and Paychex have made it easy to outsource the entire business process.

7. Simplify the budget process. Organizations tend to spend an inordinate amount of time going through massive iterations of the annual budget. A large services company eliminated thousands of hours during the budgeting process by starting with a top-down budget and focusing on what was most important. The company was able to let operations to focus on operations instead getting bogged down in administrative budgets.

8. Enact activity-based costing. Many organizations don’t have a clear picture of true customer or product profitability. Organizations often spend too much time supporting one customer over another without understanding the bottom-line impact. A chemical company went through an activity-based costing study that helped them see which products were contributing the most to the bottom line, and they eliminated underperforming products. The one-time study allowed them to improve profit margins by 5% during the first year.

9. Eliminate discounts for early payments. Organizations often rely on providing early payment incentives to their customers. For example, they offer a 1% discount for paying in 10 days versus 30 days. With low interest rates, the 20-day cost of cash is much less than 1%. Furthermore, many large customers take the discount regardless of payment date. Most organizations are eliminating the early payment discounts and accepting longer payment terms, saving companies millions of dollars.

10. Centralize purchasing. Companies operating in different geographies often miss out on consolidating purchases to enable buying-in-bulk discounts. When three different locations need similar items at the same time, they often send three different orders to one or two suppliers. A land drilling company used requisitions to consolidate purchases across the company and started buying in bulk, which saved thousands of dollars each month with bulk discounts and freight savings.

Operations

11. Value stream map it. Value stream mapping is a simple exercise that can be done without hiring droves of consultants. It is a process improvement method that focuses on eliminating wasteful, non-value add activities. More often than not, when the current state value stream map is analyzed, many opportunities for eliminating wasteful activities will emerge. A manufacturing client value stream mapped their pricing process, quickly identified transportation margin leakage in a few product lines, and was able to adjust accordingly.

12. Gamify it. Gamification is more than a fun way to keep people engaged. It also provides a way to keep people’s minds off of uncertainty by allowing them to compete for new ideas or small improvements. A production company used gamification to generate new ideas for improving their controls environment. As employees brainstormed, they were able to focus on positive changes and help eliminate inefficiencies and unnecessary control steps.

13. Kaizen. In Japanese, Kaizen means improvement. When done right, it’s a proven way to get people together with a specific improvement goal in mind and quickly develop solutions. Our chemical client used the opportunity for a one-day kaizen to improve production turnover cycle time between batches. They developed a solution that allowed them to meet customers’ ever-changing demands and reduce change over time by 20%. Learn more about kaizen here.

14. Eliminate unnecessary reports. Administrative departments within organizations love to produce reports. At times, it seems that’s the reason they exist. A large offshore services company counted the myriad of accounting-related reports produced each month and challenged the team to eliminate time spent creating reports by 50%. The treasury team decided to stop delivering all internal reports for one month. 80% of the reports were not even missed by the people who received them on a daily, weekly, or monthly basis. As a result, the treasury team reduced report stacks by 80%, allowing the team to spend more time reducing working capital.

15. Rationalize internal contractors. When organizations employ hiring freezes, managers often resort to hiring independent contractors for work otherwise done by a full-time employee. In many cases, independent contractors cost 50% more than a full-time employee, including benefits, and they end up becoming a fixture in the company. A pipeline company CFO asked every department to build a business case for each of their contractors. They found that contractors made up 34% of the permanent workforce. In one case, they had an independent contractor writing reports for more than 15 years. After reviewing the business cases, the organization discontinued 75% of the contracts entirely. Many contractors were hidden in the organization with little to no justification for their job.

16. Streamline new idea approval. Large organizations often unintentionally (or sometimes intentionally) hamper the process of turning great ideas into action. Suggestion boxes and Quality Teams are formalized to generate ideas, but the approval process is stymied with corporate bureaucracy. A new idea requires consensus, and one naysayer can shoot a great idea down. A large oil and gas company completely redesigned their idea acceptance process with a small group of business unit representatives who could accelerate new ideas into implementation without jumping though the usual hoops to get the ball rolling. The new ideas generated a positive ROI in the first six months.

17. Rationalize controls. Many organizations have implemented new controls as a part of their internal audit or Sarbanes Oxley requirements. It has become easier to appease auditors by just adding a control as needed. Over time, certain controls became superfluous and hampered business productivity. A production company performed a detailed review of their controls framework and found that their delegation of authority matrix was overcomplicated. The audit simplified the matrix and removed hundreds of unnecessary approval steps across the company, allowing management to spend less time on unnecessary approvals and more time focusing on operations.

18. Restructure customer contracts. In many cases, customer contracts were developed years ago with many restrictions that constrain the company and the customer. A midstream company restructured their customer contracts to allow for more shared inventory capacity offerings, increasing near-term cash flow. This also allowed the customer to improve working capital.

19. Refine sales prospecting. What worked years ago no longer works today. Communication with prospective clients is always changing due to the dynamic nature of digital communications. For years, one engineering firm primarily used CRM automated emails to communicate their service offerings to prospects. This worked well 10 years ago, until the firm’s prospects started blocking automated emails. The firm shifted their marketing efforts to focus on more personalized, direct emails and consequently attracted two new accounts in the first six months of their email campaign.

20. Re-evaluate your risk management program. Assessing and proactively addressing business risks is a vital part of every organization strategy. When an unusual event threatens your company’s profitability, you must be prepared to respond. Companies can implement programs to re-assess risks at least once a year to make sure their risk programs and controls are up to date. Even one election cycle or a single technology shift can have a significant impact on risk.

21. Define your sales process. Uncertainty has the biggest impact on sustaining a company’s revenue. Sales teams tend to try anything at all costs when competitive or environmental factors threaten customer retention. Ultimately, sales decline and selling costs increase. This is the best time to establish a sales process to keep sales teams focused on attracting, qualifying, and responding to the right customers. A service company examined some of their most successful sales efforts and used these efforts as a model for developing a company-wide sales process. The new sales process enabled them to reverse shrinking revenue and increase year-over-year sales.

22. Review insurance coverage. After a while, renewing insurance policies becomes a rote process inside organizations and rationalizing coverage levels is ignored. A professional services company had a client who asked them to have a multi-million-dollar liability insurance policy. In haste, the company complied and increased their coverage without asking the client if they would accept lower coverage amounts during contract negotiations. They ended up spending thousands of dollars on excessive property and casualty insurance coverage that wasn’t necessary. Later, the company renewed their contract with new, lower limits and saved thousands on insurance policies.

Employee Experience

23. Update company policies. Corporate manuals are often wrought with outdated policies that hamper decision making. New policies are added over time, but old policies are rarely revisited or eliminated. For example, a chemical company had a policy requiring employees to retain copies of paper invoices. For three years, the company scanned and electronically stored 100% of their invoices while also making copies to adhere to company policy. Once they realized the inefficiency, they were able to save filing space and eliminate extra work. This was just one of many policy changes.

24. Do a quick culture check. The increase in remote work and remote technology has affected company culture. Longer term impacts could result in increased attrition. We suggest every organization do a quick assessment to see where small improvements can be made to reinvigorate the culture. A professional services company sent out a quick check-your-temperature survey to employees. Out of the survey, the company identified and solved several issues that would have otherwise caused a handful of employees to leave the company.

25. Develop organization guiding principles. Amid uncertainty and change, organization leadership often struggles to respond in a consistent manner. Individuals on a leadership team often have their own principles defining how to respond to change. This causes confusion and a lack of cohesion in the organization. Well-defined guiding principles are a compass, helping leadership know how to respond to change and uncertainty. These guiding principles become a single source of truth and reduce conflicting messages to employees, customers, and partners.

26. Review your benefits plan. Your benefits provider should be conducting an annual assessment of how your current plan compares to competing plans. This includes comparing costs and benefits with alternative plans within your current provider. A professional services company offered its employees both an indemnity plan and a high deductible plan as two alternatives. An option to consolidate all employees on a single high deductible plan offered by another provider saved thousands of dollars. The company also contributed to employees’ health savings accounts to offset concerns about out-of-pocket expenses for doctor visits. The savings from moving to the new plan more than offset the costs of the contributions.

Technology

27. Repair instead of replace. Perhaps your ERP system is in dire need of an upgrade. Instead of trying to justify a replacement, consider beefing up reporting capabilities on top of the ERP solution. For example, Power BI has proven to be an inexpensive way to harvest information from ERP solutions to drive value. Consider our oil and gas client who was able to automate cash reporting for the executive team in a few weeks to improve forecasting and working capital. These quick wins enable teams to maintain improvements without breaking the bank.

28. Consider the cloud. Running a piece of software on company servers costs more than having the software company run it. When software makers run their software via the cloud, they are better equipped and take on the responsibility of continuous monitoring. Many on-site software applications enable companies to reduce internal support costs and deploy cloud-based alternatives by merely moving support to the software provider. A pipeline company moved their on-site project management system to a hosted environment, thus reducing support costs and improving system response time.

29. Eliminate or reduce landline telephone contracts. Even though we’ve all migrated to cell phones and video conferencing, landline phones are still around. They’re really just security blankets costing companies thousands of dollars. A large insurance company eliminated all landlines that weren’t involved in external customer service and implemented a cellular program for office lines, contracting with a large carrier to provide employees with discounted cell service. This change saved the company thousands of dollars and provided a more flexible office environment free of phone relocation.

30. Provide cybersecurity education. The bad actors are finding new and creative ways to expose your company to hackers. Recently, a couple of our team members received several email faxes and emails from our IT help desk. But we haven’t used a fax in years, and we don’t have an IT help desk. Without proper knowledge, it would have been easy to click one of the emails and expose the company. Most cyberattacks are a result of human error. In these uncertain times, we recommend every company offer frequent reminders and education around new ways hackers try to inch their way in.

31. Evaluate IT support. With the advent of cloud computing and the increased technical sophistication of most employees, the help desk and ticketing process in most IT organizations is antiquated and costly. A manufacturing company had two full-time IT contractors performing help desk duties. When the CIO dug into their day-to-day activities, he found that 90% of help tickets were routed to a specialist and 95% of the support tickets could be resolved in 30 minutes or less—but it took a long time for a specialist to get around to a ticket. In light of this, the CIO implemented an on-demand, ticket-less solution to connect users immediately to the right expert for help. He was able to eliminate the two contractors, improve response time, and lower IT costs.

32. Expand the use of current technology. Many organizations utilize less than 50% of their existing technology while lamenting its inability to meet business needs. An oilfield services company recently reviewed the functionality offered in their Microsoft E5 license. They found they could improve audit performance by utilizing the Microsoft Power Automate functionality—something that was already licensed as a part of the Microsoft E5 package. Automating the audit workflows improved audit cycle time by 30%.

33. Rationalize applications. Many organizations either over-purchase software licenses or continue to pay for software they aren’t using. Organizations often lose track of the myriad of software agreements and payments, especially the smaller licenses used by a few engineers. A manufacturing company did a review of the software licenses in their plants and found dozens of software applications that weren’t used enough to justify the costs. For example, a 20-license plant scheduling software was only being used once a week by one plant supervisor. The supervisor quickly admitted he could be using a spreadsheet instead to avoid spending thousands of dollars for the software each month.

34. Bring your own device. Many organizations supply their office staff with laptops and, at times, cellular devices. It allows the organization to standardize and secure devices that access company software, but the cost of supporting these devices is extremely high. Instead, many organizations have adopted a BYOD (bring your own device) plan. The company simply puts in a VPN that allows an approved employee to securely access the company’s software through any device. They also offer a stipend to pay for the laptop and phones. Companies that have adopted a BYOD program have reduced IT support costs by 20-30% per year.

Office Space

35. Reduce office space. Continued efficiencies with remote work has resulted in underutilized office space. Consider renegotiating office space requirements and opting out of a downtown high-rise or office park and leasing a smaller space. Doing so can drastically reduce costs. Some companies are benefitting from hybrid work models where employees have a shared workspace and work from the office every other week.

36. Reduce office services. If your employees have the opportunity for a flexible work schedule and fewer people are in the office, the nice extras such as coffee machine rentals, copier machines, a stocked fridge, and food purchases should be reevaluated. Certain office perks might not be utilized if your team plans to work remotely in the long run.

37. “Airbnb” for your office. Companies that cannot move or downsize due to a multi-year lease are using on-demand platforms such as GotSpot to temporarily lease office space to independent contractors who need a short-term place to conduct business. This allows companies to generate extra cash and put their otherwise stagnant office space to good use.

Automation

38. Automate manual processes. Manual processes are often accepted as a cost of doing business. However, staying competitive requires manual processes to be challenged. A mid-sized construction company had three AP clerks scanning invoices for processing. With employees working remotely, they notified vendors to submit all invoices electronically, which reduced scanning efforts. One of the AP clerks was able to focus fully on improving the close process and reporting.

39. Bring resources home to automate. Over the past 30 years, organizations have made a mad dash to offshore back-office clerical tasks. Savings were based upon hourly cost reductions; however, companies failed to account for other hidden costs. The most obvious costs are selection, transition, and ongoing management of offshore contracts, but hidden costs involve quality and cultural issues. Companies have started to bring billions in offshore cash back to the U.S. in the past few years. These companies are finding it easier to manage local resources and automate processes. Process automation tools are making this possible and dramatically reducing costs for many organizations.

40. Automate reporting and analytics. Spreadsheets have become the lifeblood of reporting and analytics for every organization. These spreadsheets have often grown into complex and burdensome tools that require manual uploading and manipulation of data. A regional healthcare VP of Finance said he spent 80% of his time digging through myriads of data and spreadsheets every month when his time could have been better utilized. He decided to automate the reporting process and used Power BI to automate the retrieval and processing of information from the company’s ERP systems. This allowed him to focus on strategic initiatives instead, virtually eliminating the manual data gathering and manipulating process.

 

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