“During a recession, or a slow business year, you need to pivot. You can’t make informed decisions without up-to-date financial information, and without looking at the big cost centers within your operations. You can’t pivot by analyzing $10 expenses.”
- Sharon Wesolowski, Operations Manager and Consultant
There is almost always work to be done to improve operations whether it's a recession, a slow or stagnant period for your business, or a time of growth. Below are key concepts that are top of mind for me as far as how to gain operational efficiency:
Below I'll cover an intro to these six ideas, share example case studies, and provide some signs that your business might be ready for an operations transformation project (and how this work can save/make you money).
You already know that to run your operations effectively you need technology that fits your business and your processes (or your ideal processes). But for most, this is easier said than done. It might be that you implemented an ERP or custom software years ago, and you’ve outgrown it or the technology no longer “fits” your operations. Or you’re off support on a legacy system. It could be that you’ve been making do with basic tools (old accounting software that is not cloud-based, spreadsheets etc.) and you now need to reduce manual tasks and increase visibility into business performance.
One operations transformation project I've been involved in was for an ecommerce company. The company has a unique product, and following a period of growth, was experiencing a downtown. Through a transformation project - involving not only a systems overhaul but also an operations and finance deep dive - the company was able to save upwards of $1,000,000 while improving overall business performance.
From a systems perspective, we migrated from a custom built database to Shopify Plus for ecommerce and implemented Fulfil.io for ERP. The business also made a switch from Peachtree to Quickbooks Online. These moves were game-changers.
Below is a quick breakdown of the software that has been highly effective for managing their ecommerce business:
What we’ve learned - through the particular operations transformation project mentioned above and other consulting projects - is this: when it comes to integrations there’s such a thing as overdoing it.
We initially went down the road of integrating everything (or as much as possible). But the fact was, the business didn’t need every ecommerce data field flowing from Shopify Plus into Quickbooks. We just needed the pertinent financial information (not detailed customer information, for example).
What we’ve discovered, on multiple occasions, is that it's OK to let each software do its job without “over-integrating.” Integrate where it simplifies and streamlines, leave it where it becomes an over-complication.
One of the key results from the transformation project at the niche ecommerce company was the ability to access and report on key financial information faster.
Through the project we simplified financials down to a “simple numbers” model. Meaning we condensed the entire financial statement down from multiple pages to 15 lines. Those lines were easy to read and digest, for executives and business leaders who were not in finance.
In addition to the short and simple report, was a new monthly packet that explained the entire financial situation.
Access to this information was key as the ecommerce company was experiencing a period of decline not related to a predicted fluctuation - as you have in other businesses that are seasonal or have other cyclical ebbs and flows.
This was the case with a client that does the bulk of its commerce business during the winter holiday season. Before our project, they were mainly running their company based on how much money was in the bank. They were only looking at their financials on an annual basis - which meant during the slower months their limited cash flow was not being monitored and addressed.
We moved the seasonal commerce company from Quickbooks Desktop to Quickbooks Online. This enabled them to be able to look at their financial situation monthly. The ease of app integrations with Quickbooks Online, from being able to sync credit cards, banks etc. - was again a game-changer. Armed with accurate, timely financial data the company was better able to plan and budget.
If you want to make significant adjustments to your financial situation during either an economic downturn or a slow period specific to your business, looking at $10 expenses isn’t going to move the needle.
I push for starting with the low hanging fruit: otherwise known as the most expensive area of your business. For some that is advertising, for others it’s packaging materials or shipping and labor. Addressing the big ticket items means finding gains more quickly.
A recession or slow period is a good time to reevaluate your costs and make sure you’re only paying for what you need. Similar to the personal finance advice: “the worst thing you can do is sign-up for a subscription.” This applies to business as well. Take a look at what is adding up, what you might not have been paying attention to during periods of growth.
When it comes to gaining efficiency in your operations management - your fulfillment process is key. Fulfillment is behind so many areas that are important to successful and streamlined operations:
If your fulfillment process takes 10 minutes, the question is how can you make it five. If it’s five, how can you make it two? These are the process optimizations that can lead to transformational results within your operations.
Finance shouldn’t be doing much without operations approval. These cross-functional collaborations need to be baked into your business systems and processes. For example, finance shouldn’t be paying invoices if operations haven't confirmed goods received and quality checked.
And, operations needs to know financial information as it relates to suppliers and the steady flow of goods and materials (which will halt if invoices aren’t being paid for some reason).
So, the relationship between operations and finance is important. On the other hand, in times of growth vs. times of decline, it’s the operations side that sees a drastic change in workload. From a finance side, an increase in customers doesn’t necessarily change the finance team’s workload. On the operations side, it’s probably a huge change. And is also the area that is more at risk as far as losing sales if the operations process doesn’t work well, or scale well.
You have a tangible product. That’s really it. In today’s ecommerce world, there’s always room for improvement, always someone new you’re competing against. Other signs include:
There are benefits to working with an outside consultant on projects like I’ve outlined above. Below are a few. Reach out to us to learn more.