Businesses of all kinds across all sectors consistently decree that they are “on a mission” to improve productivity.
Administrative overhead is often regarded as a barrier to productivity. In finance and other back-office functions, there is a lot of focus on improvement in productivity per head.
In this blog, we examine barriers that exist in many organisations that suck the benefits from any improvements they look to make.
1. Cost cutting
There is a perception that getting fewer people to do the same volume of administrative work can result in productivity improvements for the whole business.
While this may be true where resources are underutilised, following a decade of cost-cutting, particularly in the back office, there are few businesses with this luxury.
Businesses following this approach today are more likely to see a decrease in productivity.
One example would be when a business decides to reduce the heads in accounts payable without any change in systems or processes. It may see a decrease in the cost of the finance department, more than offset by costs incurred elsewhere in the business.
These costs would often arise as a deterioration in relationships with the supply chain due to slower payments, impacting customer service.
2. Operating in departmental silos
A barrier to success is created when the responsibility to improve productivity is delegated to department heads, acting alone, with all efforts focused within departments.
A lack of collaboration between departments can result in complexity and duplication. For example, AIIM has reported that large enterprises have multiple document repositories (50% have 3 or more systems, and 22% have 5 or more) created as a result of different initiatives to improve the line of business applications.
3. Tinkering with outdated processes
Many businesses continue to rely on manual and paper-based processes. Research by Invu has identified that 42% of medium-sized businesses still process supplier invoices manually.
There are limits to the improvements that can be made to a manual process that inevitably has many touchpoints.
4. Underinvestment in back-office systems
There is a reluctance to invest in back-office systems when the focus is on customer-facing roles like sales and marketing. It’s not unusual for a business to have gone through several CRM systems before it considers investment in the back office.
Investment in back-office systems can have an impact across the whole business rather than just the back office. For example, automation of purchase order processing (POP) and accounts payable (AP) can result in increased control, efficiency and visibility across the whole business.
The mundane data entry associated with manual systems is replaced by capture technology that frees up employees for value-added activities. This occurs not just in finance, but across the organisation.
Processes can be streamlined, reducing human touch points and errors, while improving the visibility and availability of data for relevant stakeholders.
In many organisations we see, for example, marketing keeping separate records on their spending commitments because of a lack of timely visibility of financial transactions. An automated POP system can provide visibility of these commitments.
5. Hidden information assets
Many businesses have valuable information assets locked up in employee email, windows file folders and paper files. A large proportion of data, it’s estimated at 80%, is unstructured, locked up in documents held in one of these locations. This means the problem is not only access to the documents but also access to the data.
There are barriers to productivity created by these blind spots. A lot of time can be spent recreating information already held in another part of the business. Similarly, there can be missed opportunities.
For example, a purchasing agreement locked in a personal email granting a discount for purchases from a supplier, while others in the organisation continue to purchase at list price.
The documents filed manually, in emails, and in file servers can be filed in an electronic document management system (eDM). The data contained within them can be captured using Optical Character Recognition (OCR). Access can also be limited so that only the approved personnel can see certain documents.
Data is seen by many organisations as a tremendous opportunity for improving productivity. But it can also be a risk if used inappropriately. The conversion from unstructured to structured data and the controls over access address both sides of this equation.
Productivity improvement is arguably more about adding value as opposed to reducing cost.
Productivity can be improved in the back office by investment in systems and processes that result in people focussing on higher value-added activities.
Introducing a system like an eDM system, combined with an automated workflow and data capture can help solve many business inefficiencies and help break down potentially devastating information silos.