This article are provided for information purposes only, and are not intended as legal advice.


Business owners – is it wise to keep spending money on administration or should you modernization equipment to reduce costs?

August 13th, 2009

Have you ever noticed that if a company is being restructured, the first area that is cut back is administration.  Sales people generate orders, manufacturing people create the product but administration people are purely costs and their function can be eliminated according to business owners.  What they forget is that administration is vital to the ongoing operations of the firm.  Without recording the sales of generated by the sales department, you would not have any ability to get a working capital loan, without administration collecting the receivables, there would be no cash to pay the sales staff.  Without administration, no one would be watching the collection of cash and payment of invoices.

 

If you cut down on administration, who will be doing the collection, will collection slide therefore cash flow is affected?  If you are looking for reducing the head count, why not improve productivity and improve automation of the company, the amount of human requirement is reduced.  Let’s look at the courier that comes to your door.  He gets you to sign an electronic device stating that you received the product.  As a result, this updates the central computer stating that the service has been performed and you need to invoice.  If your system is automated, the invoice will be automatically produced and mailed to the customer even before the returns from his rounds.   The old way was using a waybill.  If a person has to match the way bill with the purchase order and there are a lot of transactions, this could be very labour intensive and requires lots of staff.  If you use automation and electronic signatures, the administrative time to handle that invoice is minimal.  Admin will be used for stuffing the invoice in an envelope and mailing it.  Once mailed, someone must deposit the money or make a collection call.

 

If you are able to cut down the paperwork, you may be able to cut down in the staff required.  If you implement a scanning device instead of an instant reader, you still have to match the files etc.  You have automated part of the process but you have still kept a labour intensive component to the administration function. This automation may save time but may not save as many administrative bodies as you would have hoped.  Were you hoping that the automation worked or did you know what the results were before you actually implemented the automation.

 

Do not spend foolishly, will your automation work for what you want to do.  Is your staff waiting for 5 minutes for your computer to turn on every morning?  if so, the computer is old, needs to be upgraded so that the person could become more efficient.  Make sure you plan your automation procedure in advance, draft up ideas of what is available and then determine what goals are important to you.  if you can devise this, then you need to confirm if the automation will be able to handle what you are asking, if yes, you made the right idea.  if no, you were rushed and did not have enough time for the projection or it did not do what you wanted but your competitors have it therefore you will offer it also.  Remember, ask your accountant for advise, he should know your accounting system and hopefully can provide you with many different options.


Filed under: Business strategies — Gary Landa @ 1:51 pm


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