Too often, small to mid-sized businesses will implement technology in the back office but overlook efficiencies that can generate cash flow and reduce costs on the job.
The net income of the top construction and cleaning businesses in the U.S. is as much as 25 percent higher than the rest, and the major contributor to this difference is their use of technology.
Accurate information that provides a business owner the ability to make immediate decisions about his or her operation resulting in a boost to profitability is crucial, especially in tight economic times.
If revenue is down and the market mood does not permit price increases, then profitability can only be realized by reducing costs.
Focus On Continual Improvement
Every asset, machine, tool and employee you have must be accountable and cycle more quickly.
Just as an airline cannot survive when planes are not in the air producing revenue, your business cannot survive unless you know where your assets are and how they can be used efficiently.
Imagine being able to view where your tools and equipment are at any moment so that you can plan to transfer them to the next job.
What happens when your employees get to a jobsite and don’t have the inventory or tools they need to complete the job?
These situations and others cause accelerated costs and reduced productivity.
Under normal circumstances, a business owner will review financial information, overhead and direct operating margins at the end of a month or quarter.
But, economic realities today aren’t normal circumstances.
“Business owners must plan their destiny and not look in the rearview mirror,” states Bill Allen of W.A. Allen Consulting. “Instead of flying blindly until the next financial statement is released, it’s time to operate from a plan and understand what prevents you from 100 percent efficiency.”
- Ensure buy-in
Start by developing a culture that compels events to conform to your plan.
Anything that deviates from the plan is an opportunity for cost savings and efficiencies.
Do you have too much time loss in non-direct labor areas like idle or down time?
By evaluating what interrupts the workflow on a daily basis, you will uncover areas that, with improvement, will provide an increased bottom line.
It is up to the business owner to make a conscious decision to manage from a plan rather than react to circumstances and to hold all employees accountable for following the plan.
This transition will be easier if the tools and technologies available today are adopted.
If you’re curious as to what technologies can provide you the most reward, you should evaluate your operations to determine where your technology dollars are best spent.
- Reduce down time
Can you reduce or minimize the time spent looking for machines, tools and other assets or plan maintenance and calibration to avoid machine down time?
A tracking system using barcode identification will show where your assets are at the time they are needed, who took them last or which jobsite they were checked out to.
An integrated maintenance scheduler will flag required maintenance tasks as they are due and assure U.S. occupational Safety and Health Administration (OSHA) compliance.
- Make shrinkage unacceptable
Proper control of tools and consumables prevents costs that result from hoarding, irresponsibility or downright theft.
It is up to the business owner or manager to declare that shrinkage is unacceptable and to hold employees accountable for losses that are under their control.
This policy is given teeth when you can effectively track your assets using technology.
- Identify bottlenecks
If you’re curious as to what your capacities for output are, what the optimal workload is or how to prevent idle or down time, you should know that a computerized system that tracks labor hours will help prevent these costly issues by identifying those points where workflow gets interrupted.
Moreover, manpower that goes into manual recording and recordkeeping does nothing to increase revenue or control costs.
Technology can provide the integrated systems control over asset use, capacity, maintenance and location — and do it 24/7.
And, you don’t have to be one of the “big guys” to afford technology.
Today, systems are available for a reasonable price that can help avoid many of the costs consumed by operations inefficiencies and can be purchased as stand-alone systems focused on one aspect of your business.
Where Do You Want To Save?
Your decision about where to start depends on what areas you find are losing you the most money.
- Time and attendance
A time and attendance software package will tell you who is working when, on what job, for how long and will also produce reports for payroll.
It can be set to automatically account for start and end times, breaks, lunch, etc., to reduce the time your employees spend documenting their time.
- Job costing
Job costing software adds the ability to track inventory costs plus the total labor hours consumed at any given point of progress on a job.
- Inventory control
An inventory control software package will account for your stock parts and consumables and tell you when you need to reorder.
It can issue items to a work order and confirm that the correct items have been put on the truck.
- Barcode tracking
Barcoded inventory makes it quick and easy to take an inventory count.
Barcode technology has been actively used for over 20 years in manufacturing, distribution and retail applications to track inventory and jobs.
This technology is now available to any business that has employees and consumes inventory.
Barcode terminals are similar to smartphones and provide immediate and accurate information.
There are even barcode labels designed for harsh environments that are durable enough to withstand dirt, grease and rough use.
Making the job of your employees easier by assuring that they have what they need to perform at their best reduces stress.
Showing them that you are taking steps to increase the profitability of each job will instill in them more confidence and pride.
“Our ability to readily locate critical tools, monitor routine maintenance schedules and track broken equipment has saved countless labor hours and lowered the frustration level of our shop employees,” notes Thomas Hortman, project manager for AAI Textron Services Inc. “By providing our employees an efficient method for obtaining, maintaining and monitoring tools and equipment, tracking software has effectively helped lower our operating costs.”
While technology won’t cure the credit crunch business owners are facing, automated processes that improve cash flow and keep lenders in the loop by demonstrating that a business “has its act together” can go a long way in convincing lenders that their risk is low.