Processes and Systems Save the Day

In an earlier post, “Do you “really” know your financials?”, you might remember the story about how the company thrived and managed their risk so as to not be significantly threatened by the recession. There is more to this story when you look “under the covers” of what really went on…

A key element of this story is around the requirements of the “absentee owner” and his leadership team – how they worked together and interacted is critical to the outcome. The leadership team was actually required to provide complete, accurate, and relevant financial data to the absentee owner EVERY DAY. This might seem a bit outrageous to many, mainly because they don’t have the systems, processes, or sheer capability of making this happen.

How do they do it? It’s so easy to say “our staff completes daily processing every day.” However, in the “real world” we all live in you need policies and procedures – a process – for getting data into your system. This particular company happens to utilize checklists to ensure not only each department’s work is batched and entered, but it also requires each person responsible for an item to sign off when it is complete. Timing is THE critical part of this equation.

Ask yourself, “Have you ever suffered through the experience of getting a deliverable so late in the day that it causes overtime or renders the data useless?” Most likely the answer is yes, if you are being truthful with yourself. As a virtual CFO we see this problem pretty frequently. If there is an error or other breakdown in the system (hey, it happens) it can cause significant delays and lots of extra time from your employees – not to mention a drain on the morale. In their particular case, they have the systems in place which allow them to go back and see why it happened and how it can be prevented in the future.

This company set up their systems for real time data utilization – any transaction at any department or location is available in less than 20 minute increments. The dashboard used by management includes YTD, MTD, and DTD information on their key indicators. They invested in custom modifications to their ERP systems to give them what they need while making it easy for each department to track their activities. That said, they didn’t muck up the system with data that they don’t need. If it isn’t useful for making decisions, paying taxes, or managing something important, they don’t track it. In a lean environment, the staff doesn’t have time to waste on useless data entry. Lots of companies complain that they can’t afford to customize their system, but it certainly saved this company in the long run and, overall, has reduced their risk significantly.