As 2012 comes to a close, many of us begin thinking about personal resolutions we’d like to make and the things we would like to improve upon in the coming year. This time of reflection is also valuable for business owners and entrepreneurs. The year’s end is a good time to also examine a company’s business practices, policies and operations, and to consider changes that may help increase growth, improve efficiencies and contribute to a company’s future success.
The first step is looking at results and data from the current year to determine the effectiveness of current practices, systems and customer relations. Ask yourself what changes and improvements the company can make to improve operations and increase cash flow.
Review company policies and practices
Begin by reviewing your company’s credit, sales and collection policies. Look at each area, and identify ways you can potentially improve your process, so it can run more efficiently and profitably. Analyze daily tasks from start to finish, and ask questions. Can you centralize a process by product, task or client? Which makes more sense and improves efficiency?
Then, once you fine-tune the process, document it. Develop an internal procedure and policy manual for employees to refer to and update as needed. This will streamline your internal and external practices and improve the consistency in delivery of your product or service, which will help improve profits.
Review your customer’s payment efficiency
Do you know how to evaluate if your clients are profitable? It’s important to evaluate how your team’s time is being spent. Some clients are more demanding and, thus, require more time. If this is the case, are you charging for the additional attention or is the client actually costing your firm time and money? In some cases, it may be more cost effective to resign the account.
To help determine the profitability of a client, track the average hours spent on each client per month, and review this on a quarterly basis. Doing so can quickly uncover high-maintenance clients and allow management the opportunity to review pricing to determine if the required yield is being met. After all expenses are allocated and subtracted from the revenue from each client, it is easy to then conduct a comparison of the clients and evaluate each quarter.
Review your receivables
If your customers are taking too long to pay, or accumulating outstanding invoices, this is costing your company money. If the problem is consistent, don’t shy from using collection outsourcing companies or agencies to get the monies owed. While an outside agency will charge for its services, the alternative may be lower collection rates, higher borrowing and bad debt write-offs.
Looking back will move you forward
Reflecting on 2012 allows businesses to celebrate the year’s successes and provides the opportunity to seek out solutions for working smarter and more profitably. After collecting the necessary data and assessing your company’s policies and practices, think about what you can do better for your business in 2013. While sometimes drastic changes may be what it takes to turn your business around, sometimes simply an increased awareness of the inner workings of your company can make all of the difference.