Many small businesses are aware of the fact that improving business performance is paramount for the long term success in the market place. However many business owners are do not know how to start the process of improving business performance or the tools available to help them in the process.

Taking stock of the current situation is critical before implementing the changes required in improving business performance. Understanding the factors affecting the business’s success and performance objectives is important to identify the necessary changes needed. It is also important to identify the key performance indicators that measure success of the changes implemented.

There are many tools available for helping you in improving business performance. These include:

• Balanced scorecardBalanced scorecard is a strategic planning and management tool developed by Drs. Robert Kaplan and David Norton. It helps to monitor strategic performance against the strategic goals. Balanced scorecard incorporates non-financial measure with financial measures to give the managers of the business a balanced view of the business performance. Balanced scorecard helps to break the broad goals to measurable activities and metrics. Balanced scorecard focuses on 4 key areas:

1. Financial performance
2. Internal business process
3. Learning and growth
4. Customers

• SWOT analysis
  SWOT analysis is used to evaluate the Strengths, Weaknesses, Opportunities and Threats of the business. You can set the objectives of the business after performing the SWOT analysis. This helps you to identify the areas in improving business performance.
• Trend analysisTrend analysis help you to identify the hidden patterns in business performance over a period of time. This will help predict possible future outcomes and help planning strategically to respond to those outcomes
• BenchmarkingBenchmarking is the process of comparing your business’s performance against the best practices available in the market of similar size businesses. It guides the business to improve their performance to match the industry standards by giving the essential comparative information.
• Key performance indicatorsKey performance indicators are set of values that help measure performance objectives of the factors that are critical to the success the business. Key performance indicators must be quantifiable and clearly defined and aligned to the business objectives. You also need to set targets for each of the key performance indicators.

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Cost reduction shouldn’t be only about cutting costs. Cost reduction should focus on bringing operational and structural advantage.

Here are some suggestions to consider when implementing strategic cost reduction program for your business:

1. Identify areas of operational inefficiencies and implement leading practices to improve efficiency to achieve cost reduction.

2. Consolidate purchasing process. You may be buying the same goods from different suppliers, particularly if each department seems to have its favorite suppliers. Centralise purchasing to maximise purchasing power and bulk discounts.

3. Cut the admin paperwork.

Make use of the technology (for example Xero Network) to automate data processing and improve efficiency of admin methods and process.

Request monthly consolidated invoices to reduce administration costs.

4. Request a reason for a price increase from your suppliers. Don’t accept a price increase without a valid reason from the supplier.

5. Obtain alternative quotes where possible. Advise existing suppliers that you are going out to bid and give them a chance to reduce their prices.

6. Use the good cop/bad cop approach. Bring in a new person to negotiate price. This helps removing emotion from the process and maintain the established relationship with the supplier.

7. Take advantage of your suppliers’ expertise and ask them for suggestions and ideas on how to improve the efficiency in the buying process. Could frequency of ordering, taking deliveries etc. allow their own cost reduction and enable them to pass the savings on?

8. Keep the right level of inventory. Reduce your stock levels and encourage suppliers to hold stock and deliver stocks on demand.

9. Consider cloud based business solutions to reduce your IT cost. On-demand cloud solutions (Iaas, Paas, Saas) enable businesses to avoid making investments in IT assets and helps reducing depreciation and cost of maintaining and upgrading them.

10. Consider using virtual meetings to reduce travel costs and time. WebEx, GoToMeeting, Saba, Microsoft, etc. provide excellent meeting technologies that can reduce the costs dramatically.

11. Watch out for automatic renewals of contract for leases and service agreements and review them. An automatic renewals lock you into subsequent years at the same terms as the original service/lease agreements. And need to be terminated, in writing, during a specific time window. Just to make things confusing, termination notification periods for service agreements vary from the periods used in the lease agreements.

12. Try using suppliers’ own-brand products. This can reduce costs significantly.

Strategic cost reduction should build sustainable economic benefits through changes in processes and structure and transfer of capabilities.

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Strategic Management accounting in SMEs

SMEs are mostly owner managed and most of them employ a bookkeeper for data processing requirements and an external Accountant to prepare and file statutory accounts and tax returns. Both these disciplines does not provide the SMEs owners the forward-looking information to help them measure their businesses performance.

In recent times many accounting software products increased their capabilities to give the managers a set of key figures to give a snap shot of the business at a point in time. However they don’t cater for helping business owner to make decision in a specific business cases. And in many cases of functionalities of the software is not known to the user or turned on to help the decision maker.

Strategic Management accounting is vital part of performance evaluation and analysis and pay an important role in planning and decision support. SMEs cannot afford to miss on strategic management accounting. Many high performing SMEs are demanding for better management information and focusing on changing their internal reporting.

To drive efficiency and to be competitively positioned in the market SMEs should take actions to get the right skills in place to capitalise on opportunities. Engage a management accountants or demand for these services from your external accountants, it’s key to your success and sustainability.

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• Monthly bookkeeping subscription and Xero support
• Bi-annual review of data and accounts
• On time BAS lodgment

Are you ready to take your business to the next level?

With the XERO Basic package we will:

• Get you your very own XERO Subscription
• Prepare and lodge BAS
• Send you tax reminders
• Meet with you to enlighten you on simplifying your accounting and taxation structure for maximum efficiency

 
Along with the above, we will also undertake to prepare your financial accounts, prepare and lodge FBT and income tax returns and assist in migrating from your current software to cloud accounting.

While working with you, there are a few aspects that you will be handling from your end. These are:

• Maintaining integrity of financial data, reconciliations and XERO setup
• Preparing and lodging payroll obligations
• Analysing performance and reports

 
Our costing for the service we provide will depend on:

• Number of entities
• Complexity of your organisation’s structure
• Bank accounts and credit cards
• Transaction volume
• Quality of your records and to what extent they are up-to-date

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