Hidden Profits Blog

Finding the Gold in Your Business

Hidden Profits Author:

Lynda J. Roth

As the president and founding partner of Woodland Hills-based LJR Consulting Services, Lynda advises clients on ways to improve profitability and productivity through both technology and business processes. She also works with companies and private equity firms on the role of information technology in mergers and acquisitions.

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SaaS Is It For YOU?

Filed under: ERP Selection,Information Technology,SaaS,Software as a service,Uncategorized — Lynda Roth at 1:02 pm on Tuesday, June 15, 2010

This morning I received a white paper about evaluating SaaS – Software as a Service solutions.  This has been a question that many clients have been asking in the last couple of years and one that I addressed for my own business.  There has been so much written lately about SaaS and it has been touted as the perfect solution for everyone.  Is it really?  I am not saying that it does not have its place in the smorgashboard of software options and it certainly provides numerous benefits but as the white paper points out, you must evaluate it objectively against all options and weigh which criteria are most important to your company.

The white paper is entitled ‘Evaluating SaaS Solutions: A Checklist for Small and Mid-sized Enterprises’ you can download it here tinyurl.com/2ua6qtd

The key evaluation criteria listed in the white paper are:

  • Solution Functionality which includes
    • Core system functionality
    • Customization and personalization capabilities
    • Integration capabilities
    • Workflow capabilities
    • Access to data for ad-hoc analysis and reporting
  • Solution Pricing Terms & Condiditons
  • Uptime availability, quality of service and responsivenes of the SaaS provider – in short the Service Level Agreements (SLA)
  • SaaS solution’s security and privacy
  • SaaS solutions backup and recovery capability
  • Saas solutions customization and personalization capabilities
  • Saas solution’s integration capabilities
  • Saas solutions workflow capabilities
  • Saas Solution ability to provide access to data for ad-hoc analysis and reporting
  • Existence of a community of SaaS solution users for networking and collaboration

I would add 2 other criteria to their list. 

1.  The ability to convert data from the SaaS system to a different system.  As the business grows or needs change there may come a time when the company decides they want their applications in-house.  What are the options for converting data from the system and loading it to a new system.  Included in this would also be what happens if the SaaS provider is sold, terminates operations and/or no longer supports the system. 

2. The technology platform.  While it is somewhat true that by definition a SaaS system will be on supported data base, programming language and operating system, that cannot be taken for granted.  Some software firms have created their own data base and/or programming language that would require dependence on the software firm or may end up obsolete in the near future.  For example several years ago I hosted my website with a company who at the time had a very state of the art editor so I could change my web content easily.  However, with the advancements today in web editors, my hosting company has fallen behind and I am now looking to move.  While this cannot be completely avoided as technology changes very rapidly, it should be a consideration just as it would be for a purchased application.

Today the selection of core business applications such as ERP, CRM, MRP are very much like selecting a long term partner.  The process should not be taken lightly weather searching for a SaaS, purchased or hosted solution.  Detail requirements need to be defined, potential solution options identified and evaluated against the requirements.  Since this is a critical decision and not something companies address on a regular basis, I strongly suggest bringing in a consultant experienced in system requirements, evaluation and selection to support your team. 


The Corporate Crash Diet – when reducing cost and laying off staff becomes unstainable

Filed under: business process,finance department,Information Technology,lean accounting,Uncategorized — Lynda Roth at 10:35 am on Tuesday, June 1, 2010

Have you gone on a corporate crash diet in the last couple of years.  After the binging in the early 2000’s and the financial collapse in 2008, many companies felt it necessary to put themselves on a crash spending diet.  So what do I mean by that.  They did one or more of the following;

  • Reduced staff corporate- wide by 10%, 15%, 20%
  • Halted all spending on marketing, training etc.
  • Halted all capital spending on improvements, acquisitions, product development

So now it is almost 2 years later and the problems from these actions are starting to be felt.  These actions were taken to preserve the company but now the results may very well have put the company on an unsustainable path. Why does this seemingly correct response become unsustainable.  Frequently this creates a downward spiral in which

  • Customers become unhappy because service suffers
  • Employees become unhappy because of increased workloads and overtime
  • Productivity suffers because of increased workloads
  • Sales suffer because of lack of marketing and the above results of downsizing

Or the second scenario is that the company weathers the storm and sales come back company starts to grow and now they begin hiring again because they are short handed.  The end of this scenario is that they have brought all the cost back that was shed and now they are vulnerable to the next downturn.

A better approach and one that will lead to sustained improvement is to evaluate all business process and systems.  Determine where there is waste and inefficiency and quantify the impact to profit and cash flow of eliminating or reducing the waste and inefficiency.  Often by identifying and implementing these sorts of targeted cost reducing strategies not only are the costs in the business reduced to be in line with the economic conditions, but the company becomes stronger and more competitive.


How To Evaluate the Financial Supply Chain

Filed under: business process,ERP Selection,finance department,Information Technology,lean accounting,Uncategorized — Lynda Roth at 5:51 pm on Monday, May 31, 2010

We have discussed the Financial Supply Chain and the importance to cash flow and profitiabilty for optimizing it.  Optimizing the Financial Supply Chain is a function of optimized business process and effective information technology.  In my last post, I recommended that business process be addressed before selecting new information technology systems. You want to optimize in this order so you can define requirements for the systems needed and the functionality required in each system.  So how to go about evaluating the effectiveness of the current Financial Supply Chain, selecting and prioritizing the processes to be optimized and creating the new system requirements. I  recommend the first step is an assessment to determine where your problems are and cost to the company of the current Financial Supply Chain processes. 

What is involved in an assessment.  A good assessment will address 4 key areas:

  1. Information technology infrastructure
  2. Information systems – ERP, Operations, Reporting, Document Management etc.
  3. Business Processes
  4. Organization – Finance and IT

The first step is to evaluate the business processes in operations, finance, sales and other supporting departments.  Inefficient processes that you are looking to identify are:

  • Duplicate data entry
  • Extensive use of Excel spreadsheets
  • Duplication and multiple filing of paper such as invoices, purchase orders, employment applications etc.
  • Manual processes to support lack of system integration
  • Non-standardized processes due to multiple systems i.e. multiple ERP or accounting systems
  • Lack of integration with customers, vendors & bank
  • Processes that employees feel are inefficient
  • Departments that do not have access to ERP, CRM systems
  • Month- end close process that requires more than 3 days

The second step is to evaluate the information systems and technology infrastructure.

  • What ERP or CRM system is being used, is there more than one
  • When was the last time ERP system was upgraded & what is the technology platform
  • What processes are a result of issues with the ERP, CRM or other key operational systems
  • What custom in-house developed systems are being used, how old are they, how are they supported
  • What systems are used to create financial reports/information for finance, outside organizations, operational management
  • What are the issues the frustrate the IT organization
  • Is there a consolidated data center
  • Do all employees have access to the core systems and servers
  • How are applications integrated
  • Are applications outsourced

The third step is to evaluate the Finance and IT departments

  • How are the departments organized – are there multiple IT and/or finance departments
  • Who heads the IT department and do they address strategic business issues
  • What skill sets do each of the members of the IT department possess
  • What functions are outsourced and with what organizations

These are the key components of an assessment.  By evaluating these areas you can define functions within the organization that are inefficient.  After you have identified inefficient processes the next steps are to create continuous improvement teams to define solutions to improve efficiency.

Often a consultant trained in lean methodology may provide key insights in the business processes and be able to recommend technology solutions.  If you would like assistance with your assessment or process design please contact LJR Consulting Services at 818-227-5025 or email me at lynda.roth@ljrconsultingservices.com

What Is First The Chicken or The Egg?

Filed under: business process,ERP Selection,Information Technology,lean accounting,Uncategorized — Lynda Roth at 11:37 am on Sunday, April 18, 2010

This is an age old question and today the chicken and egg that I am going to discuss is redesign of business process versus selection of an ERP system and which should come first.  If you listen to most ERP vendors and system integrators they will definitely say – Select the ERP system first. They say this because they believe that the ERP system has bulit-in best business processes so then you can redesign your business processes based on how the ERP system is designed.  While I agree that ERP systems do have good process design in them, more goes into business process redesign than just how the ERP system functions.  Also, the company will have much better understanding of what they need from an ERP system if they have thoroughly reviewed their business functions and processes prior to an ERP evaluation.  So while you will not design processes down to the level what screens in the system are used to process a transaction, you will define the following

  •  what functionality will be used and the importance of each system function
  •  how data will flow in the organization
  •  what new policies and controls will be required as a result of the new processes and ERP system
  • what departments will perform what functions.

Some say it really doesn’t make any difference you can do this in either order.  Well let’s look at some examples and the situations that can arise from selecting an ERP system before you define business process.

Selecting the wrong ERP system.

I had a client a couple of years ago that is obtained because the owners were concerned about the rapid increase in the need for accounting personnel in their company, how long it took to complete the financial close process and the inadequacy of the financial information they had to manage the business.  I spoke with them and performed a detailed assessment.  The result of the assessment was that they had significant duplication of effort between operations and accounting, poor integration of systems and extremely manual processes.  They were using an old version of one of the Microsoft ERP systems and an upgrade with a complete revision of processes that would move origination of transactions to operations would greatly have increased their efficiency and information.  I also found out that they had purchased a new ERP system a year before I arrived and had done nothing with it.  It was not implemented at all.  This ERP system was a highly rated system that they had purchased because a very good sales rep from the company had convinced them it would solve all their problems.  We implemented the system which was adequate.  However, what solved the majority of their problems was modifying the processes and organizational responsibilities to originate transactions in operations, utilize additional functionality such as Purchase Orders and upgrading other key systems such as ADP payroll.  While the new ERP system was used, it was not necessary.  The company could have saved significant investment by simply upgrading the system they had and making the business process change.  Had they completed the assessment and business process analysis prior to the purchase of the ERP system they would not have made that mistake.

Implementing ERP and receiving little or no benefits.

A client last year requested that I help them with an ERP evaluation.  They desperately needed a new system for multiple reasons including new business process.  I suggested that they redesign the business processes prior to detail evaluation because I knew there would be much contention and resistance to change in this company.  They felt they needed to move forward quickly with the ERP evaluation and assured me they would perform a detailed business process design after the system was selected.  So we did fairly detailed requirements analysis to support the ERP evaluation.  This was critical because it did help them to select the right ERP system.  After a 3 month evaluation process they purchased a quality system that would provide them the platform to make the necessary changes to their business.  However, where the problems arose is that once the system was purchased, all the management just wanted the system implemented.  They were no longer interested in putting in the time and energy to redesign the business process and data flow to obtain the maximum benefit from the very hefty investment in the ERP system.  Instead they configured the system just the way they used the old system, they did not clean up any data and after 8 months of implementation they moved the new system to production.  To their great surprise they had worse problems than with the old system.  Why?  Because now they were using a system that had race car like functionality like it was an old clunker.   Except for solving technical problems they obtained absolutely no benefit.  Now they will spend more money to fix this problem.   

System Selection Done Right

A client I am currently working with has the problems that I see all the time.  The company has grown dramatically in the last 10 years and has completely outgrown their systems and processes.  I performed an assessment for them last year, and they already knew they were going to need a new ERP system.  However, they were unsure as to what was the most important functionality and how they would implement some of that functionality like purchase order in their organization.  So they agreed to embark on a business process design using lean business process techniques.  They continued to prepare their ERP requirements utilizing information from the lean business process project that we coordinated.  As a result they have now worked out policy issues, defined details on the impact to operations of certain new functionality, defined how they will integrate other custom systems with the ERP modules.  Now they are in the process of reviewing the ERP systems on their short list.  The business process project has given the executives a level of understanding of how ERP systems work and what their business will need that they would not have had otherwise.  They will make a much more informed ERP decision and be able to implement it much faster with significant benefit to the organization.

My experience with these and numerous other clients over the years indicates that a company that performs a fairly detailed business process review and design based on lean business practices and standard ERP functionality will make a much more informed ERP decision and experience a much higher ROI and level of satisfaction from their ERP implementation.

For help with your business processes or ERP systems contact LJR Consulting Services at 818-709-6583 for a free consultation.

Creating A Strategic Finance Function

Filed under: business process,finance department,Information Technology,lean accounting — Lynda Roth at 6:40 pm on Saturday, March 20, 2010

In the competitive economic environment on the 21st century, finance is expected to be strategic and focus on providing accurate and very timely information for operation decision making and optimizing profits and shareholder value.  In addition the finance team in today’s businesses is responsible for developing appropriate controls and reducing risk to the operation. That puts big demands of the CFO and finance function.

In my last post I discussed the Financial Supply Chain and the importance of its optimization on working capital and sustained profitability.  This week I found an article from 2006 which again reinforces the importance of an optimized Financial Supply Chain in enabling the Finance Function to be more strategic.  The title of the article is ‘Best Practices in Creating a Strategic Finance Function’ by Katharina Muellers-Patel.


In 2006, the author showed the breakdown of Finance function and the time devoted to them as follows:

Transaction Processing – 44%

Controls   –  21%

Management – 18%

Decision Support – 17%

So 65% of the finance function in companies is consumed by transaction processing and the controls of the transaction processing function.  Most of that time can be eliminated through efficient use of information technology and organizational and process efficiency.  The article sites that at that time top performing companies allocate only 30% to transaction processing and 45% to decision support and management activities. While that is a significant improvement I believe it can be better. The article sited that the main source of differences between the top performing vs. lower performing companies are the organizational structure for finance and the type of Information Technology (IT). 

The organizational structure generally focused on shared services finance organizations and outsourcing.  The primary benefit from outsourcing is the use of lower cost labor.  In my experience the problems associated with outsourcing of financial transaction processing is that the information transfer between the company systems and the outsource company’s system makes the organization cumbersome.  Also, since the primary  benefit is lower cost labor, eventually the cost of that labor will begin to increase thus lessening the benefit.  Also, there is no additional benefit to profitability.

In general companies tend to opt for a shared services organization.  The key to the success of this structure is not just creating the organization, but also creating optimized process and efficient utilization of technology.  For example, creating a shared services organization in which each of the combined organizations utilize different financial systems or different instances of the same system does not provide any benefit to the company.  Instead it places greater strain on the employees in the shared services organization as they must learn the different systems and continuously log on and off of systems in order to process all the transactions.  I have seen this situation at multiple clients and they are always a mess.  The article sites 3 different examples of companies that created shared services organizations especially one that continued to obtain improvement by changing technology platforms.  The shared service function was AP.  The initial structure the shared group used the multiple systems from each of the original companies.  Then they made significant improvement by just moving to a single ERP  platform and at the time of the writing they were changing the platform again to create a completely automated and integrated procure to pay function.

The study in the article showed that in general companies that had automated more than 66% of their finance processes had average finance costs of 1.2%  of revenues while companies with less automation had average finance costs of 3.0% of revenue.  Companies that relied on manual process and spreadsheets had process costs of $2.21 per $1000 of revenue while those with efficient automated processes had costs of $0.72 per $1000 of revenue.  The study also showed a correlation between the significance of the cost reduction and the simplicity of the information technology systems.  IT simplicity refers to standardized applications, integration of systems, and use of ubiquitous user interfaces such as web and smart phones and integration with partners (banks, vendors, and customers).

Today automation is much more that simply implementing ERP systems.  For an assessment of your companies finance processes and technology call LJR Consulting Services at 818-709-6583.

The Financial Supply Chain

Filed under: business process,lean accounting,Uncategorized — Lynda Roth at 8:15 am on Wednesday, March 3, 2010

I am reading a new book ‘Optimizing Back Office Operations: Best Practices to Maximize Profitability’ by Zahid Khalid.  While the title may sound a little boring, I was so excited to find this book. It is a very good read and definitely not boring!  Zahid has gone into detail of the business case for creating lean business processes in back office operations.  He has given the name ‘Financial Supply Chain’ to all the operations that are performed to consummate the business transactions for a company and document them per accounting and regulatory requirements.  This is a perfect description of these processes because

1. It is a simple and easily understood metaphor for all the business processes

2. It describes the importance of these business processes.


Most business people understand the importance of the Operations Supply Chain and impact on the businesses profitability.  If your operations supply chain is inefficient, manual, and ineffective, most businesses would be out of business in today’s competitive environment.  As Zahid points out many companies like Dell have grown dramatically and become leaders in their industry because of the advances and often complete redesign of their Operations Supply Chain.  As with Dell, the Operations Supply Chain has given them a competitive advantage.

Zahid asks the question ‘What is the compelling reason for taking the plunge into the world of financial supply chain?’  Answer ‘ CASH’!  He states that independent studies conducted by several research firms estimated that between $500 billion and $1 trillion is tied up in unnecessary working capital globally in the financial supply chain.  That is a lot of money and a lot of lost profitability!!!!   As Zahid points out  ‘Working capital optimization improves cash flow, thereby minimizing reliance on lines of credit and other short-term borrowing.’ It also reduces time required to perform the tasks of the financial supply chain, reduces the number of employees required, improves the accuracy of the information produced and provides that information in a timelier manner for decision making.

Let’s discuss each of these benefits in a little detail

1.  Minimize reliance on lines of credit and borrowing.  In the easy money days of a couple of years ago most executives did not worry about how much they used credit and just accepted it as a need in business.  Now, however, with banks pulling back on credit, executives are seeing their ability to meet the demands of their businesses severely restricted.  Reducing dependence on credit now means survival to many businesses.

2.  Reducing time required to perform the tasks of the supply chain.  This has numerous benefits since when we reduce time we reduce cost of each transaction which goes directly to profit.  As we all know $1 of reduced cost translates directly to $1 of increased profit.  However, usually reduced cost means pain but by creating a lean optimized process, you can have reduced cost without pain.

3.  Reducing the number of employees is part of the reduction in cost.  It also helps to improve accuracy because we all know that the less hands in the soup the better it is. 

4.  Improving the accuracy of the information produced is one of the most critical aspects of Financial Supply Chain optimization.  It is the equivalent of reducing errors and waste in the Operations Supply chain.  Poor quality of information leads to embarrassing restatement of financial results, poor management decisions, loss of revenue, and increased cost from late charges, and inaccurate payments.

5. More timely information for  decision making is probably the most significant benefit.  In the days when business moved at a slower pace it was ok to use information that was aged for decision making.  But information is not like a fine wine that gets better with age, it rots. Today information has a very short shelf life and to manage a successful business information is needed when it is happening not 30 days after the fact.

As we have discussed on some of these posts creating lean or optimized business process requires a combination of process change enabled by information technology and services from financial supply chain partners such as banks.  It also requires team members that have knowledge of finance, change management, and information technology.  Optimizing your Financial Supply Chain may be challenging and time-consuming but also extremely profitable.  Contact us at 818-227-5025 to discuss how an Optimized Financial Supply Chain can improve your profitability.

Thoughts on new information technologies

Filed under: business process,Information Technology,lean accounting — Lynda Roth at 4:14 pm on Tuesday, February 9, 2010

In the last couple of days 2 non-related experiences have emphasized to me the importance of looking at business differently.

Sunday after the Super Bowl (fabulous game) I watched the new reality show ‘Undercover Boss’.  In the episode last night Larry O’Donnell the president & COO of Waste Management went undercover to see how his company functioned at the operations level.  He found that several of the cost cutting, productivity enhancing policies he had enacted had unintended consequences.  These unintended consequences for the most part created hardship on operational employees primarily because they were designed and implemented by employees that had never worked in operations.

Yesterday morning I had coffee my friend Bob McCormack.


 I worked with Bob for several years when he was CIO of a major company. Bob is now a member of Pasadena Angels and has invested in several new technology companies.  Today we discussed how things have changed in the technology world in just a few short years and the impact that those changes may or may not have on traditional corporate thinking about how to use technology in business. 

Bob gave the analogy that traditional corporate IT departments operate with blinders on and stay on their ‘railroad track’ strategies.  By that we mean they stick to the tried and true processes that a company has a big ERP and CRM systems, top tier1, because those are the best.  These ERP systems are hosted at the company offices and supported by big IT staffs. Then the company has big accounting staffs that enter and manipulate all the data.  Over the last 30+ years the software vendors have stuck to that paradigm and they just continue to make the monolith bigger and a little easier to use.  It moved from mainframe connected terminals to client/server technology to web-based user interfaces.  However, in the end the process is still the same as the original manual processes that were replaced by computer systems to begin with.

However, in the last few years the advancement in wireless technologies, communications, internet, document management systems, smart phones and other devices have made it possible for the game to change dramatically.  The capability now exists that is relatively inexpensive to have data entered into an electronic medium at the source of the business event and never be touched by a human again.  The less human activity in a business transaction the cheaper that transaction is and the more productivity can be increased. 

Many of these types of transactions are topics we have discussed before in discussions on lean business processes. Some game changing ideas are

  • Using smart phones to enter and receive Purchase Orders for companies with significant field operations.
  • Creating expense reports on smart phones or web-based applications that are integrated with credit card websites and other applications to automatically download expense transactions and the projects to which they are to be charged.
  • Creating and sending receivable invoices electronically to customers immediately upon fulfillment of the sales transaction.
  • Utilizing electronic banking applications integrated with ERP for vendor payments, bank reconciliation, cash application, etc.
  • Receiving and posting payments electronically from the bank so that customers never have to create and mail a check.
  • Receiving key performance indicators regarding your area of business via a smart phone application. 
  • Using document management systems to transfer paper into electronic images and provide electronic workflow integrated with smart phone or email applications
  • Hosting applications with a separate hosting company and utilizing outsourced IT personnel on an as needed basis to reduce the expense of highly specialized IT personnel

These are just some of the game-changing technology and processes that are available. They are not just for large companies, in fact many of the new technology companies have business models that make these new technologies very cost effective. 

 However, these are not magic bullets and the implementations will not look the same in every business.  To implement these ideas and reap the benefits of reduced cost, improved productivity, happier customers and employees and increased profitability, requires you to leave the ‘railroad track’ mentality behind, and look at how the operations of the business function, what problems exist in the operations and seek out new solutions for those challenges. It requires that operations personnel be involved in the design of new solutions with or without technology to ensure that the new solutions support the operations of the business as well as the desires of management and stockholders. 

Contact LJR Consulting Services at 818-227-5025 for information on how to utilize new technologies and process in your company.


Getting Started On Your Lean Project

Filed under: business process,Information Technology,lean accounting,Uncategorized — Lynda Roth at 3:25 am on Monday, February 1, 2010

In the last couple of posts I talked about the importance of looking at the organization differently, expanding thinking beyond our day to day limited view to find ways to change processes and technology to improve the business, successfully navigate the current economic situation and become more profitable.  This post is a continuation to discuss how to get started. The idea of creating a lean organization is a concept that today many executives are talking about.  You could almost say it is the new fad!  I am a very strong proponent of lean thinking and do believe it is the next level for business to improve productivity.  Most companies have the core business systems needed to function and so the benefits of just implementing technology have already been integrated into the organization.  So using Lean principles to get the next level of productivity is important especially with the current economy.  However, like many new ideas or concepts, it is easier said than done.

So what are some of the challenges that companies face when they want to take on lean projects.

  •  Resistance to Change and Skepticism
  •  Lack of Expertise in Lean Process
  •  Lack of Exposure to other Technologies and Processs
  •  Lack  of Time – Too Busy Chopping Wood To Sharpen the Ax Syndrome
  •  Lack of a Decision Process on Policy Changes, Project Priorities etc.

These are all very real challenges and not unlike the challenges faced when new technology is implemented. The first thing for organizations planning to apply lean processes is to realize these challenges exist and plan how they will be addressed.  I will discuss each challenge individually in future posts.

The next step in getting started is to pick a pilot target area. This should be an area in which the lean process has strong support at all levels of management. It should also be an area where there is significant pain in the processes.  For example, a process in which the competition has an advantage over your company.  Or an area where employees are working significant overtime, have high error rates and/or can’t keep up with the volume of work.

Once the pilot area has been identified, you need to determine the team members that will be involved.  It is very important to have team members from different areas of the company, not just from the selected business area.  If the team consists of just personnel that work in the area to be addressed there is a very strong tendency to make very limited changes.  You should include employees from departments that are touched by the area to be made lean.  The goal is for the team to understand the entire business process from the beginning to the end, not just the area that seems to be the problem.  It is also very beneficial to include on the team personnel that have experience at other companies.

Finally, bring in outside support.  You do not want an outside consultant to do all the work, however, you Do want an outside consultant to provide input in the following areas:

  • Project Management 
  • Envisioning possible new processes
  • Mentoring team members 
  • Change Management

 The consultant should be a firm  who has experience with lean techniques, the business processes, technology solutions and change management.  By doing this it enables you to overcome some of the change resistence, keep the project moving forward and provide insight into new process options and supporting technology.

Get started with your project. Keep moving forward and Be Successful!!

How to Profit in Current Economy

Filed under: business process,Information Technology,lean accounting — Lynda Roth at 7:11 am on Wednesday, November 18, 2009

Well we are reading lately that the recession is over and the economy is starting to grow again.  At the same time we hear how unemployment and under employment is still at extremely high levels.  With all those people out of work it will be hard for them to pump much into the economy.  So while the worst may be over, the economy is still pretty weak kneed and your sales are probably not where they were a few years ago. 

Also, in order to survive you have probably laid off a few employees and you are struggling to meet the demands of the work load.  As your own company recovers, and you get busier the next big question is ‘How are you going to get all the work done with a reduced staff?’  Of course some people will be hired back, but do you really want to return to the levels you had before?  Plus with new regulations, Obamacare and potentially cap and trade, you are unsure of what your cost structure will look like.  Those employees will be more expensive to hire back.  And don’t forget the cost of momey – and the availability of money.  The credit markets are still pretty tight and it may be hard to get debt or equity for growth. 

So what can you do?   As I mentioned in my post about the ‘Profitability Vice’ the answer is to become a more efficient and streamlined business – often called a lean business.  A lean business is one that modifies their business process to eliminate ‘muda’ waste, increase the use of information technology solutions and empower employees throughout the organization. 

In the majority of businesses today, there is significant duplication of effort where managers in operations do work using offline systems only to be duplicated in back office operations using the official corporate computer systems.  For example, customer invoices are created on spreadsheets or Word documents, mailed to customers and then sent to the AR department to be entered into the AR system.  Another example, operations personnel go through an informal process to approve and purchase needed supplies.  Then someone in the department maintains a record of what was purchased on paper or spreadsheets.  Vendor invoices are mailed to the AP department who then goes about investigating who purchased the items and getting approval to pay the invoice.  Enormous amounts of time are wasted in this process and frequently vendor discounts are missed or late fees charged because vendor payments are delayed.  Issues like these can be resolved by new thinking and providing information technology solutions to enter the information in the systems in the operations departments.

To learn more about how to implement lean business processes and technology contact LJR Consulting Services for a free consulation.  Call us at 818-227-5025 or visit our website at www.ljrconsultingservices.com

On Becoming Lean..

Filed under: business process,Information Technology,lean accounting — Lynda Roth at 10:31 pm on Monday, September 14, 2009


In the early 1800’s Henry David Thoreau said
 ‘Our Life is frittered away with detail…. Simplify simplify.’  
Most of us believe that life during Henry David Thoreau’s lifetime was much simplier than today. We are mired in much more detail today. The essence of a lean organization is one that simplifies processes in order to improve productivity and have greater clarity and timeliness of information and ultimately improve profitability.
Fifty or so years later the great Supreme Court Justice, Oliver Wendell Holmes Jr. said the following :
‘Most of the things we do, we do for no better reason than that our fathers have done them or our neighbors do them, and the same is true of a larger part than what we suspect of what we think.’ – Oliver Wendell Holmes, Jr.
Man’s mind, stretched by a new idea, never goes back to its original dimensions.   – Oliver Wendell Holmes Jr.
These quotes also apply to reviewing current business processes with the goal of becoming a more lean,efficient and profitable organization.
First, what is being done in the company at the current time is not necessarily bad or good, the business processes have often come about because that is the way others did it or they are generally accepted business practices. The challenge with that way of creating business process is that it does not take into consideration unique issues in every company and rarely takes into account new technological advances.
Second, in order to really redesign process and become lean, we must completely rethink the entire organization, why processes are the way they are, and what are new ways of doing the task to eliminate the waste, inefficiencies and bottlenecks that have become commonplace. This requires that we stretch our minds to new ideas and when we do that we wonder how we could ever go back. In fact we can’t. So when the new ideas are introduced and tried, they seem very strange, unusual and against the order of the universe. While some ideas may not fit, many will over time. 
Becoming a lean organization takes courage, and dedication.  The rewards for the management team that becomes truly committed to lean is a more profitable organization positioned to take advantage of the recovering economy. 
Contact LJR Consulting Services for a free 1 hour lean consultation.  818-227-5025
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