An organization’s financial efficiency goes beyond the amount of revenue they earn. It also factors in asset turnovers, how many days an invoice remains in account receivable, and how much inventory is on hand. Together, these are calculated to determine the economic health of a company.
When an organization is financially efficient it allows it to extend its credit or obtain a large loan for capital improvements. If you have issues getting this additional income, then it’s time to focus on how well your company handles its revenue and expenses.
Here are 5 ways to increase your company’s financial efficiency.
Outsource Batch Payment Processes
Processing single receivables and payables to individual customers or vendors is an inefficient way of controlling finances. There’s bound to be an invoice or bill that’s missed along the way. Perhaps the information is delivered to the wrong group, thus delaying payment.
One way to reign this in is to outsource the payment process and activate batch deliverables. For example, a health organization might need to batch medical billing for New England customers and vendors. For this, they would engage a company like NE Accounts for assistance. In turn, the billing firm would send out materials once a week or month.
Manual entry of business-related information is bound to result in confusion. Transposed digits on a bill or an incorrect total for inventory causes a loss of income and a shortage of product. This issue flares up if other departments don’t know about the problems so they can be corrected.
To fix this you need to switch from manual to automated processes. In a situation where inventory and sales need to be tracked at the same time, an Enterprise Resource Planning (ERP) software package is a necessity. Once the modules are programmed and the data is added, an ERP automatically moves transaction information from one department to another. The proper representatives are alerted if billing or inventory information is incorrect.
Training is imperative to financial efficiency. The mistakes mentioned in the above steps occur if employees aren’t educated in the most basic processes. Not only is this inefficient but it also leads to lost productivity and unhappy workers.
There must be constant training. It needs to take place at the time of hire and during an employee’s lifetime at the company. At least once a year the entire organization should go through training on the products they work with along with items like anti-money laundering (AML) and the CIA triad for data — confidentiality, integrity, and accessibility.
Constant communication with employees is critical to financial efficiency. Without ongoing discussion and meetings, workers develop uncertainty about what they need to do. Yes, they might ask a co-worker; however, they could receive incorrect information if that person is unfamiliar with processes.
Letting your team members know about changes or issues goes hand-in-hand with regular training. Sending an email is not the solution, because not everyone reviews their inbox promptly.
Meetings must be held, in person or virtually, to allow workers to absorb the information and ask questions they might have. After the meeting, send out the minutes so they have a future reference point.
Collaboration Between Departments
Financial waste takes place at a greater level when departments aren’t on the same page about a project. As a result, money is spent by one group that was originally allotted to another. This causes tension between managers and employees on all sides.
Hiring a project manager halts financial inefficiency. Their job is to be a center point for all planning, timelines, and item distribution. They’re also in charge of the budget.
If a group needs more funds than they were initially given, the project manager determines the reasons why and if there are ways to work around a budget increase.
Don’t let ineffective policies and lack of communication damage your financial efficiency. Get together with your managers to develop a proper course to stabilize spending and increase revenue.
Make sure your employees are trained on these changes and are constantly kept aware of what the business is doing. This increases their productivity and confidence that the business is headed in the right direction.