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Small Business Resources

Is Your Business Outgrowing Its Processes?

By August 4, 2014 No Comments
Is Your Business Outgrowing Its Processes?

Business Process Most businesses experience growing pains at some stage. Typically, firms start out as a one-man band, with the business owner doing everything day-to-day. Next come the first members of staff and a more formal structure. Then, many firms suddenly find they’re being held back, with their ways of working out of step with the enterprise’s development.

It’s not just that SMEs using outdated or inappropriate systems are less efficient. The insolvency practitioners’ group R3 warns that businesses that try to do too much without the right infrastructure put their operation at risk of failing. Its president Giles Frampton says: “Businesses need to be on the lookout for any signs that they’re over-stretching themselves. Sales, profits, and business expansion may be on the up, but if a business runs before it can walk then problems can emerge. Logistics, finance, cashflow, and the operational side of a business all need to keep up with expansion, whether this is geographically or in terms of demand or sales.”

So, how can you tell if your SME has got too big for its current processes and is in need of a reboot? There are some classic tell-tale signs that might indicate you could benefit from a new approach.

Is information up-to-date?

If your employees find it a battle to input data into your computer systems or to keep paper files organised then you have one of two problems – sloppy staff or inadequate processes. Some bosses always blame the former, but very often inefficiencies lie within the business’s make-up. Ask yourself:

  • Are you getting reports and company information when you need and ask for them? It may be that the accounting and business software you’re using is no longer fit for purpose. Often, business owners start out using entry-level packages, but these can soon create as many obstacles as they eliminate. Talk to your accountant about your company’s needs, whether you need to upgrade your technology, and which system may be best for you.
  • If your business still depends on manual systems, there can be several warning signs that things aren’t working well. Again, information may not be immediately available, documents may be passed between employees creating a backlog, or paperwork may even get lost. Staff absence can also cause a major upset to a company’s administrative set-up. These may be indications that it’s time to join the 21st century and introduce some automated technology into your enterprise.
  • Do you spend a lot of time outside of working hours catching up on admin? Very few entrepreneurs work a 9-to-5 day, but, equally, if your company is running as well as it should be then you won’t find yourself regularly updating financials and clearing orders into the early hours.

Are your systems working together – or against each other?

For start-ups, it’s typical for separate lines to be established to deal with invoicing, wages, expenses, and orders. But there comes a time when running such parallel records isn’t sufficient to keep abreast of the running of the company.

  • Can you easily find accurate information to indicate the current state of your business? If you can’t produce co-ordinated figures across all aspects of the enterprise quickly to give a snapshot of the firm’s performance, then you have a problem. Again, technology could be the answer. The Institute of Chartered Accountants for England and Wales points out the benefits of the dashboard tools typically included in most modern accounting software systems. These show key performance indicators and give the latest data in a quick and easy-to-use format.
  • Do the business’s figures add up overall, and are you able to split out data, such as different costs and income? If you don’t feel able to make a confident decision about finances it could be because information is too scattered and incoherent to allow you to do so. The same applies to order processing and inventory. Ask yourself if the facts that you have to hand are accurate, comprehensive, and reflect the real business situation.
  • If you’re constantly coming up with temporary solutions to the larger problem, you’re effectively applying sticking plasters to get your SME through the next few months until the next problem arises. This is also a clear sign that it’s time for a bigger and more radical overhaul.

Are you juggling the numbers yourself?

In the smallest enterprises, in particular, it’s often the owner-manager who undertakes the management accounting process, regardless of his or her aptitude for numbers. Research by the Chartered Institute of Management Accountants found that business bosses who do the accounts believed that this involvement gave them a better insight into the enterprise, despite evidence that many SMEs didn’t understand the detail and made wrong decisions as a result.

Some business owners regard accountants as bean counters, but they can often serve as valuable business advisers. Plus, the sort of pain-staking analysis that a qualified accountant brings to a business’s finances is something that most bosses have insufficient time – or expertise – to provide. An accountant can also advise a firm on what type of accounting tools to use, be they server-based, in the cloud, or even outsourced.

The right hand doesn’t know what the left hand’s doing

Successful businesses don’t just have systems in place to keep track of sales, profits, and expenses. To run a company efficiently also requires communication processes to ensure that everyone is kept informed of what they need to do and when. This also serves to make your people feel a part of the firm. Too many bosses fall foul of thinking that it’s okay to have everything in their own head. Consider:

  • Do you talk to all of your staff every day? If not, it may be a hint that the business is big enough to justify a proper management structure and the introduction of formal lines of communication to keep everyone in the loop. But think about any new processes carefully. They should aid efficiency and flexibility, not just create lengthy sign-off procedures that complicate things.
  • Is your staff motivated and engaged? Again, if workers believe that they’re not kept informed they may feel they aren’t part of the business in a meaningful sense. Indifference and poor productivity can soon follow. Watch out for signs that the mood of the operation has changed, and seek to re-engage employees if so. Neglecting this important aspect could also have a very negative impact on customer service.

Finally, a simple and vital sign that it’s time to revise your business’s operations is if you can’t fulfill orders or afford to take on new business. Take a long, hard look at how you work, as well as your finances, and figure out what’s really hindering your SME’s growth. This type of analysis may take time, but, sometimes, that’s a necessary investment in your business, too.
Image courtesy of tiramisustudio / FreeDigitalPhotos.net

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