Einstein defined insanity as doing the same thing over and over but expecting a different result. In business, repetition of processes with the purpose of achieving the same result is the desired outcome. Standard results are valued as a predictor of success over random results achieved through inconsistent practices. Properly thought out and executed processes are the tools by which business operations can best position themselves for success. As an owner or an operator seeking a potential buyer, processes and procedures are integral and here’s why:
- Consistent results. A properly prepared set of processes and procedures will lead to consistent business operation results. Consistency adds value since the company will continue to operate whether you, as the owner are there or not.
- Error reduction. Adherence to processes and procedures minimizes the possibility of error. Recognizing that errors warrant expense to rectify the situation, profitability is then enhanced.
- Reduced training costs. Documented processes facilitate an easier training process for new hires when they can follow prepared collateral on how to perform their tasks.
- Reduced reliance on employees. Defined processes and procedures reduces the risk of over reliance on any given employee. Following established frameworks minimizes upheaval during staff changes or vacation occurrences.
- Fraud protection. A properly designed set of processes and procedures ensures specific checks and balances to reduce the company’s exposure to fraudulent activity.
Review your business practices for consistent application of processes and examine how they flow together. Assume a staged, logical approach that takes into consideration the different functions and operational streams within your company but remember that you do not have to do everything at once.
For example, start with invoicing. Document how the invoicing system is currently being done and then look at it from a critical standpoint to identify how it can be done better. Consider what controls can be included to reduce the risk of errors or fraud. Conduct the same evaluation and documentation on your other systems, and continue to refine the procedures until everything has been reviewed. This approach will provide a valuable foundation for your business operations and a solid approach for continual improvement updates as the company evolves.
Einstein would be proud!
Greg Clarke is a Partner with SB Partners, a client focused accounting, tax and business advisory services firm. He can be reached at gclarke@sbpartners.ca or via their website at www.sbpartners.com.