REINVENTING THE WHEEL (FIGURATIVELY)
The biggest roadblock to efficiency
A client of mine, whose family business has been running for more than 30 years, recently decided they needed to become more efficient with their expenses and with their cash forecast and control. Their current Finance Manager just quit to go study abroad and they hired me as an interim CFO to keep things under control while they hired someone else. What do you think was the biggest “roadblock” I encountered when trying to become more efficient? I’ll give you a hint: it had nothing to do with data management and creating new reports under different formats.
The Biggest Roadblock To Efficiency
In my article Implementing Financial Controls is Easy…right? I gave a similar answer to this section. The biggest roadblock you will find to making your finance department more efficient (and any other department for that matter) will be changing the status quo of current tasks. I have to admit that I too fell prey to the most common excuse most people give when they don’t want to do the initial work that comes along with any change: “we need more people to get the job done”. This might be true at times, but in most cases it is not.
Once I talked with the general manager of the company, who logically denied this request to obtain the goal of reducing expenses instead of increasing them, the only way to go was to eliminate unnecessary tasks and improve the necessary ones. One obvious example was to use the ERP software to generate a local tax form that was previously done manually.
Up until that moment they had to register the information into the software and later register the information in the form manually. Why didn’t the information come from straight from the software? The reason was because they had a tremendous amount of initial workload to get everything up to date. Even though the future benefits exceeded the initial cost tremendously, their focus was on current emergencies and not strategic, long-term improvements.
How To Get Around The Roadblocks To Change
There are a few things you can do to start implementing meaningful changes to your finance department without creating any sort of crisis. Here a few important ones:
- Understand why the team does it the way they currently do. It is not enough to request every single payment be done by bank transfers instead of checks. Not all situations are equal. I remember once when Steve Jobs said in his early days (and I’m paraphrasing here) “I didn’t know anything about management at the time. I just asked people why they did things the way do”. What he found whas that most of their reasoning was pretty much based on “this is the way it has always been done”.
- Define the critical changes that need to be made and start with those. There’s a phrase that says “he who holds a lot in his hand has very little grasp”. Basically, what this means is that you can’t do everything at once. There were a lot of things that could’ve been implemented in my client’s company to become more efficient, but attacking all of them at once would’ve prevented me from actually getting things done.
- Consult with the team before making any changes: If you don’t understand the finance department 100%, then your analysis is biased. Ask the person who’s been there the longest for their opinion. Business is not a one size fits all.
- Ask the team what can be done to make their jobs go faster and accurately. Related to the previous point, ask the team “what are the tasks that take up most of your time?”. Their answers could pinpoint (and help you verify) the critical changes that need to be made.
- Implement, improve, repeat. No matter how many years you have been in business, there is always room for improvement and not everything can be implemented in the same, exact way in two different companies. After setting everything in motion, you have to monitor its performance and make the tweaks where necessary to become truly efficient.
Try applying these steps in your own business and tell me about your experience in the comments below or write me an email at info@thefinancecourse.com !
Giancarlo Jiménez, founder of The Finance Course, is a Finance Professional with more than 11 years of experience in the field of Finance and more than 4 years of experience teaching about Corporate Finance in a Business School. Want to learn how to interpret Financial Statements & Ratios to make decisions at your small business? You can Sign Up To The Free Course by visiting this page.
