Many SMEs have zero visibility of this critical information

The usual reason business owners and chief executives seek a business management system is because they can see growing delays, errors and inefficiencies in the business. They notice it’s getting increasingly time-consuming to manage their workflow. 

And yes, a good business software system can fix those issues (and you can get one for under £10k). But there’s a benefit that’s often overlooked, and it is equally important. In the long term it’s perhaps even more important. 

A business system can tell you things about your business that you’ve never been able to know before. In particular you can find out where you’re making a profit, and critically, where you’re making a loss. This is really important, but many businesses try and manage without it. You know you’ve been making money, but not which activities are profit-making. Which means that if things change you can’t be sure you’ll continue making money. 

This business blind spot makes it difficult to price your services accurately in order to ensure you make money on a job. 

Capturing the key metrics

How can your system gather the information you need? Let’s say your business fits floors, and you have a team on-site somewhere installing floors for a client. Using an iPad, at the end of each day your site manager can record completed tasks and the time taken on each one. Meanwhile, in your warehouse the team can use an iPad to record what materials go out for each phase of a particular job. Your delivery driver, taking materials from the warehouse to the site, can record actual mileage and time taken over each delivery. Your system captures all key actions: simple, relevant and granular. 

The real win here is that this all-important information is gathered as you go (each time you do a delivery, despatch an item, or finish work for the day) and with almost no extra effort. You enjoy the benefits without having to employ another person to sit there and type it all in. 

Now, for each phase of a job, you have a record of the time taken by your team, a record of the materials, and a record of the transport costs. (You can add your machine time to this too – let’s say you have a lathe, the system can extract data about how long it’s run for and on what job.)

If your system holds purchase orders and supplier invoices and knows the cost of your people’s time, materials and transport, it can calculate what you spent on each phase. It can then compare what you quoted – often broken down by phases and materials – with the true cost. Suddenly you can see precisely which phases of a job made money and which lost money. 

More accurate and profitable estimates 

Not only that, you can also see whether it’s time, materials or transport that cut into your profit. Armed with this information, you can review and improve the accuracy of your estimates. You’re also now able to identify bottlenecks in your workflow. Following the 80-20 rule, you’ll likely find that a small number of bottlenecks account for the majority of your inefficiencies. Fix them and you’ll make a major improvement to efficiency. 

You may notice that it’s unforeseen complications that are really costing you money. For example, that could be when several pieces of equipment arrive on site damaged, causing your team to down tools for a day. Then you can ask: are the complications actually unforeseeable or is there a pattern? If it happens often you can build a fair contingency into your estimate. Or, if your system reveals that one particular supplier often provides damaged equipment, you can change supplier. 

Strategic insights 

These kinds of insights make the difference between a business that is flying blind and one that can make a reliable profit across all its operations. The need for these insights isn’t typically what brings businesses to us, but it’s often the most powerful and strategic benefit that they gain from a business system.

Our free Business Efficiency Audit focuses on the transparency of running costs, and other important questions like it.