Where do we look for best practice when it comes to business or professional service firms? Industry benchmarks are good as are comparisons to other professional groups (bookkeepers can look to accounting firms or even law firms). But to get to the ultimate in best practice, think sport. After all, best-in-the-world can be measured in milliseconds or in centimetres when it comes to a competition. Team sports are a great place to look: think of the 2012 UK cycling team, Team GB.
Team GB stunned the world by taking seven out of 10 gold medals, the same as their performance in 2008. How did they do it and is there an actionable lesson for an accounting or bookkeeping firm?
Aggregation of marginal gains
The ‘secret’ to Team GB was revealed by the team’s performance director, Dave Brailsford: it’s about improving a lot of things a little bit. He gambled that if the team broke down everything they could think of that goes into competing on a bike, and then improved each element by 1 percent, they would achieve a significant aggregated increase in performance.
The bottom line for Team GB was its stunning performance in two successive Olympics. Think of your firm or business and think about how that could look. Rather than looking for the ‘silver bullet’ solution, Dave Brailsford considered that by improving lots of ‘systems’ a little bit, the net benefit is significant. The scope of aggregated improvement is huge, in every business.
While the ecosystem of accounting software and add-ons has the potential to make reporting a more timely and relevant affair, many business owners don’t get the benefits of this quantum leap in potential productivity gain. Typically, month-end accounts still take anything up to two weeks to be available resulting in the business decision-maker having nothing but a rear-view of their business.
Moreover, accounts receivable management tools (the add-ons that can be integrated to accounting software) can potentially reduce collection periods from a painful 60-70 days to a more reasonable 30-40 days. That’ll make another micro improvement in the SMB’S cash flow.
Another area where micro steps can make a contribution to the ‘aggregate’ is discounting. Sales people – even business owners – are by their nature, focused on getting the sale, not maintaining the margin contribution to the business. Discounting can be a highly effective tool in securing a sale but excessive discounting can be deleterious to the bottom line when handled indiscriminatingly. Making a micro adjustment to a level of discounting can have a significant impact to the bottom line. Halving a 10 percent discount to 5 percent on $2m in sales will flow an additional $100,000 to the bottom line.
The list goes on; every business can achieve micro improvements in their performance. It won’t take too many to achieve a gold medal status in overall performance.