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The small business efficiency factor

For many small businesses owners and management, reviewing and updating their business processes is not a top priority. However, recreating or revising administrative process to be more effective and efficient can aid not only in compliance, but also essentially reduce costs and boost bottom line.

Over time, processes that were previously productive can become less productive and even unsuccessful altogether. Breakdowns in administrative and company processes occur for several reasons, including changes in staff or employee responsibilities, acquisitions or mergers, new system implementation or the centralization of back-office functions. When a process becomes ineffective, negative consequences, such as resource constraint, inaccuracy, unnecessary fines and a decline in reputation, can occur.

To identify the root cause of the issues and mitigate the negative consequences of an inefficient process, management must take a step back and review the entire process from start to finish. To accomplish this, management needs a team that can objectively execute the process, follow a methodology to identify inefficiencies, and improve the effectiveness of the process. 

The SIPOC Process
While various methodologies are available, one popular resource that can assist in the first step of improving company processes is the SIPOC Process, which stands for suppliers, inputs, process, outputs and customers. The SIPOC diagram outlines all of the suppliers who provide services or products to the process; the inputs needed for the process, including raw materials and information; the process depicted as a sequence of actions; all of the outputs, such as products, services and information, that come about by the process; and the customers or users of the products or services output by the process. Utilizing the SIPOC diagram can help management quickly outline each step of the process and determine where problems may exist. 

All personnel involved in the process to ensure that all areas are covered should discuss the elements of the SIPOC diagram.  A designated employee should be assigned as the lead to ensure that the group stays on task when discussing these elements and that all discussions are recorded in meeting notes.

Once each of the SIPOC elements have been discussed and evaluated, possible issues and inefficient or ineffective procedures will begin to appear.  These items identified through the use of a SIPOC diagram need to be further evaluated to determine if they are truly an issue or simply a false negative.

For example, a possible issue identified in the SIPOC discussion could be that payroll information is entered into the payroll system late due to company departments sending in time sheets after the prescribed deadline. 

To confirm or disprove this theory, a report should be run from the system to determine when the payroll information was entered and compared to emails from department managers containing the time sheets. 

Obtaining measurable support for why the issue may be causing problems is key in this process.  This data driven approach will help you obtain buy-in from your employees and management, so that all involved understand the problem and start formulating ideas to address the issue.

Once problem areas within the process have been identified and confirmed, your team should map out the process.  This will help all employees visualize at what stage in the process an issue occurs.  The process should then be re-mapped or re-engineered to resolve the issue. 

To change a process, the right stakeholders need to be involved and must agree that the change is needed.  Stakeholder understanding and agreement is a crucial step in the process as it ensures that there will not be barriers to resolving the issue. Companies of any size and in any industry can decrease costs and utilize employees to their full capacity by assessing the administrative processes that are the backbone of business.

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Bert Bondi

Bert Bondi, CPA, is a partner in RubinBrown’s Assurance Services Group.The firm’s comprehensive tax practice provides a full range of services, including federal, state and local tax consulting, planning and preparing. Additionally, the firm specializes in S corporations, estate and trust planning, mergers and acquisitions, and retirement planning. Contact him at 303.952.1213 or bert.bondi@rubinbrown.com 

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