Marginal gains drive business performance
I imagine like many people I’ve been utterly submerged in the London 2012 Olympics over the last week or so. And as a Brit I’m so proud of both the show we’ve put on for the world right from the amazing opening ceremony, James Bond and Mr Bean et al., through to the world class games facilities. (I have to confess that the striking imagery and the haunting musical accompaniment of the Olympic rings being fused together during the opening ceremony makes me catch my breath every time I see it.)
And as a proud patriot I’m full of admiration for the way that Team GB has performed to deliver our best medal haul in over a hundred years. By comparison in what is still relatively recent memory, at the Atlanta ‘96 games Team GB earned just one gold medal versus the
twenty-two twenty-four at London 2012 (so far).
Of particular note has been the outstanding performance of the Team GB cycling team with seven gold medals out of a possible ten. A couple of days ago the BBC interviewed British Cycling’s performance director, Dave Brailsford, and asked him about his much discussed marginal gains approach towards achieving the team’s consistently supreme performance.
“The whole principle came from the idea that if you broke down everything you could think of that goes into riding a bike, and then improved it by 1%, you will get a significant increase when you put them all together.
There’s fitness and conditioning, of course, but there are other things that might seem on the periphery, like sleeping in the right position, having the same pillow when you are away and training in different places.
Do you really know how to clean your hands? Without leaving the bits between your fingers? If you do things like that properly, you will get ill a little bit less.
They’re tiny things but if you clump them together it makes a big difference.”
This got me thinking about applying the principle of marginal gains to business performance, and how you might go about deconstructing and then improving individual grains of process in a business.
So, I quickly threw together a few candidate 1%’ers for quick marginal gains in Xero.
- Clean your customer contact records to ensure that your invoices get to their intended recipients as quickly as possible and don’t spend a week getting internally re-routed because your records contain a partial or incorrect postal code, for example, or where you should send them directly to the accounts department rather than your primary contact who’s seldom at their desk. This might win you a few days better debtors performance in return for a couple of hours cleaning up your Contacts in Xero.
- Ensure your payment terms are clearly shown on your invoices. Better still include a prominent PayPal payment hyperlink on your invoice template to encourage customers to pay straight away at best, or at least make it easy for them to pay when the time comes.
- Use Tracking Codes in Xero to easily analyse regions, departments or customer types and then run individual Profit & Loss reports for specific aspects of your business. Export various comparison P&L’s from Xero into Excel and bang in some formulae to show comparative profitability percentages to highlight anomalies which would otherwise be invisible when summarised. Use that knowledge to identify your least profitable products, services, customers or regions and then decide what you might to do correct poor performance. It could be your highest volume customer is also on a high cost delivery route which could be quietly eroding any profit you superficially think you’re making from them.
- Check in on Xero’s bank reconciliation screen every day (as of last month you can now do this in Xero Touch) – if you leave it a few days (or weeks) between checking or reconciling your bank account, the resulting cash flow blind spot is a great place for late paying customers to hide.
- Reconciling or just checking in on your banking frequently also helps you to identify prompt payers. What better way to cement a great relationship with your best payers than to drop them an email note of thanks or mention your appreciation the next time you speak with them. Easy, low effort; potentially high return.
- Every month or quarter run the Customer Invoice Report in Xero, export it to Excel and use the spreadsheet’s date handling functions in conjunction with a filter or Pivot Table to build a quick and dirty average debtor days view by customer. Take the top 25% latest payers by value and work out how you shave a week from the length of time they usually take to pay.
- If you’re a service provider use Xero Touch to compose and email your invoices to your client before you leave their premises. Doing that compared with leaving it until the weekend or later could pull forward your customer’s payment performance because there’s zero admin lag at your end getting in the way of the invoice landing in their inbox.
- If you have some customers who are on a regular billing terms like a subscription, rental or monthly contract, then use the Repeating Invoice function in Xero to set and forget invoicing for those customers. The very moment the invoice is due to be sent, Xero will spark into life and do it for you. There’s no time lag which minimises debtor days, you don’t have to remember to invoice them and it makes you look like you have the billing efficiency of a public utility.
These are just a few little tweaks that on their own won’t amount to much, but when combined together could stack up to make a big difference.
Got any better ideas or tips, drop them into Comments below.
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