When you’re running a company, modernizing your operations can seem like an overwhelming task. Consider that nearly half of small businesses say their top technology challenge is simply figuring out how technology can help them. But the benefits of improving your company’s financial system — even incrementally — can save you time, money and, ultimately, increase your bottom line. In this brief article, we’ll break down the hidden costs to your business of maintaining the status quo, and the benefits of making these three moves to reinvent and modernize your business:
- Automate repetitive tasks to create scale
- Update your software
- Modernize your expense system
1. Automate for ScaleYou want your staff to focus their energy on growing the business, not on repetitive tasks. Even basic accounting software can help you automate some of your regular accounting processes, including payments, taxes, reporting and more. Repetitive tasks are not only a drag for staff, they can also hold back the business. Here’s how:
Wasted TimeNearly two-thirds of small businesses report having invoices that went unpaid for 60 days. Consider how much time your staff is spending chasing down those payments, as well as on other repetitive tasks. A business that sends 300 invoices per month, requires an average of 173 hours of labor. 90% of the cost of invoicing is labor. With automation your staff can put the hours they previously spent on manual tasks toward strategic efforts.
Long Payment CyclesSmall businesses typically get paid slowly, in part because they’re slow to invoice due to the manual nature of the process.
2. Upgrade Your SoftwareMost small to mid-sized companies initially manage their financial management systems in spreadsheets or with basic accounting software purchased at an early stage of their business. However, as businesses grow, so do their financial needs. Using an outdated financial management system comes with many costly risks, including:
- Competitive disadvantages: Using older software means you’re leaving the door open to your competitors to benefit from modern software efficiencies.
- Security breaches: Outdated desktop software means you’re more prone to security breaches and expensive recovery costs.
- Lost time: Software automation can reduce labor costs by 50%. That’s time they could otherwise use to drive your business forward.
- Potential errors: Nearly 90% of spreadsheets contain mistakes, according to several studies.
3. Modernize Your Expense ManagementA traditional expense process involves many people and moving parts. Employees spend their own money or use petty cash doled out by the company; they turn in receipts and reports; a supervisor must approve the report, and the finance department then processes the request. Reimbursement follows, taking an average of one to three weeks. Common frustrations employees have with expense reports include lost receipts, missed submission deadlines, carrying debt on personal credit cards until reimbursement, waiting for reimbursement, and unintentionally exceeding spending limits. As your company grows, this traditional process reduces visibility and control of your real-time cash flow and creates a host of inefficiencies. The hidden costs include:
- Wasting Thousands of Dollars: According to the Aberdeen Group, an average expense report costs $29 to process. If your company processes between 10-15 expense reports a month, that’s nearly $3,500-$5,250 annually in paid staff time.
- Employees Penalized: Due to lost receipts, forgetfulness or lack of time, approximately 50% of employees have eaten an expense rather than filed a report.
- Tying Up Credit and High Interest Rates: If you provide credit cards to employees, you’re likely paying between 14%-18% interest rate on balances, not to mention tying up the total credit afforded to your business.