Hidden Profit Barriers
The Barriers To Profit are often "hidden" - otherwise competitive, profit-savvy executives would eradicate them immediately. Areas quietly lowering a company's value include:
Poor Cash Flow Management. Using bank lines of credit to "hurry up" and handle payables can unintentionally exaggerate cash flow trouble if in-flows are slow. Balancing both cash in and cash out while minimizing the cost of money plugs a profitability leak.
Inefficient Back Office Processes and Reliance on Manual Processes. Reliance on spreadsheets for reporting (which slows decision making), too many hands touching routine processes (because that's the way it's always been done) and assuming that all infrastructure costs are necessary for production is what keeps executives up at night every payroll period... and drains profit monthly. Meanwhile, the perception that automation or technology is "an expense" is a myth and often a barrier to exploring simple, efficient solutions to getting more done in less time...and preserving profit.
Poor Vendor Management. Trying to diversify, outsourcing too broadly or procrastinating renegotiation of vendor contracts as company circumstances evolve and using too many vendors for a single product can result in higher costs for materials and services....creating an unnecessary drain on profitability.
Poor Cash Flow Management
A majority of businesses today rely on some level of working capital loans to support cash flow which can be expensive. Dependency on a line of credit may be caused in part by slow billing and/or poor collection methods. Accelerating cash in flow with improved billing and collections processes may reduce interest costs and free bank loans for more strategic uses.
To address billing and collection issues LJRCS will:
- Review billing processes including entry of billing information
- Recommend and implement technology and process solutions to improve billing
- Review invoice collection processes
- Recommend and implement systems and processes to automate collection processes
Inefficient Business Processes and Reliance on Manual Processes
Rarely in the life of a business are the business processes that are used every day deliberately designed for efficiency. As the business grows and changes, the people in the business adapt to what is required to get the job done. Most of the time that involves some sort of manual processes which result in reduced productivity and profit leaks. LJRCS analysts provide the following services:
- Review business processes and systems to determine solutions to improve efficiency
- Select and implement new systems
- Re-design business processes, streamline business transactions and reduce a variety of overhead costs
Poor Vendor & Payables Management
Frequently when a business grows because of expansion or acquisition, multiple vendors are used for the purchase of the same product or service, which can result in overpayment of products and services. In addition, because of multiple systems and departments, the Payables process is often fraught with inefficiency and high cost. LJRCS analysts will:
- Review the current vendors and vendor contracts to determine where vendors can be consolidated
- Recommend and implement systems to obtain information about vendor volume and pricing
- Identify and implement technology and process improvements to reduce payable process expense
These process and technology changes will generally greatly reduce the cost to process payables transactions and may reduce the cost of the products and services used. These reductions ultimately translate into increased profit.