What To Do About Process, the P-word?
In this issue ....
Our Pre-Occupation with Process
450 words, a 2 1/2 minute read.
Not that we know but we believe CI owner/operators think; even dream about implementing process in their businesses more often than not. Yet, we find process and procedures are rarely found in the businesses we work with. The dreams of things working in highly repeatable, high yield productive fashion step seem to be more often a stretch than reality.
And, when it comes to the core baseline process flow of the business, most have little appetite for tackling their business model. Ironic that operators work so furiously but miss the underlying core of what determines their financial outcome.
The P-word, process, is not as elusive as it might seem. Process has three basic benefits: it helps you communicate better inside and outside the organization, it helps you evaluate how the work is being done and it brings clarity to the outcomes being rendered.
Locking in a baseline process from contract to completion is more about alignment than anything. For some companies: cash, revenue, costs, inventory, collections, expenses become too much of a mystery. In a general accepted accounting principles world, revenue and costs and expenses are aligned to provide a clearer picture of what the company is doing at any given time. Most of our companies in CI do not deploy GAAP methods. But that is not a reason to not align revenue, costs and expenses.
So, why not start with booking the project. What about the deposit that was paid? Inventory is ordered and received. Now work begins, labor is expended, equipment is delivered even install parts get used on the job site. Additional monies are requested what about them? More work is performed. All this time payroll is being paid. Rent, utilities, gas, vehicles repairs, and all that other stuff is being paid. Any returns from the project are restocked. The project finals and a final balance is due from the customer and ultimately gets paid. Labor charges exceed or come in under the estimate; all final charges are made to the project.
Having a carefully constructed process for recording and accounting for this activity is crucial. The account coding, strategic classification, inventory & deposit accounting, project tracking/costing, client request for money and final reconciliation are all part of this process. The more standardized the process is, the better the results. At VITAL, we have a well-defined baseline process, we hope you will commit to implementing it and gaining the value of better feedback and results.
Without this baseline process in place, companies become lost and can be at risk of highly differing results. Taking a decision to adopt a baseline process for the business is game-changing. And at least it is a start to making process center stage at your company.