Business Processes Investment

A clever business person uses the good times to improve productivity which either helps grow the business faster or offsets any losses in “down times”. Putting your cash to work for the benefit of growing the business usually involves investing in equipment, people or processes to improve productivity.  This article focuses on business processes.

How much should your business spend?

According to Gartner, large corporations with $10B or more in revenue spent 2.5% of revenue on IT.  Small companies spend 7% or more of revenue on IT. (IT spend is the average across all industries and includes hardware, software, support and processes.)  They spend because they know that IT provides both the critical apparatus to keep the business going, but also has ability to automate many of their contract compliance, finance, field operations, manufacturing, sales and HR functions and therefore improve productivity.

The improved productivity gained by regular improvements is often the difference between growing the company versus downsizing and retrenchment. Small businesses are notorious on only spending money when they need to, but as they reach 20 or more staff, little efficiencies go a long way.  Think of the amount of time spent:

  1. Getting approvals for leave or travel
  2. Claims for reimbursement of expenses
  3. Searching for company policies or forms
  4. HR or pay related queries

At least 10% of employee time could easily be spent on above, which works out to more than $100,000 per year for an organisation of only 20 staff with wages at $25/hour. Putting workflows can cost around $50,000, which means a net savings in productivity within the first year.

Software

Any task or paperwork that is repeated regularly can be improved with software. For example, leave forms, expense forms, travel forms, new hires, and requests for training. These processes are common across all industries and often automated with some workflow software and someone who knows how to customise it. The more workflows you do, the more cost effective it can be as you have a starting cost of up to $8,000 for software and labour to automate your first process such as a leave or expense form.

Here is a sample screen shot for an expense form which is automatically routed to management for approval(s). Once approval is gained, payroll, staff and staff manager are informed. On the other hand, if the form is not approved, similar notifications go out to staff and manager with the reason for disapproval.

expense example

With multiple claims and an easy dashboard for monitoring (see below), the time savings accumulates rapidly. Automating your processes for approving or disapproval of expenses saves in follow-up, tracking and other time involved in a manual process.

In a recent interview with a Thomas Friedman, a New York Times Columnist he stated:

“The principle driving forces behind the need for a more inventive worker is access to more automation, more software, more machines and more people, and more talent of an above average quality, noting that even “cheap genius,” is a click away”  

The essence of genius is therefore the business invests a portion of their revenue each year in IT to gain the competitive efficiencies needed to grow and/or survive in the future.

dashboard

References

IT Key Metrics Data from Gartner Group