Guide

10 ways to improve efficiency in your business

Improve efficiency in your business by mapping what’s broken, and figuring out what to fix first.

Two people sit working at a table next to a wall covered in post-it notes. The table contains a laptop and pizza boxes.

The A to Zen of increased operational efficiency

A more efficient business is generally more profitable and more peaceful. Work through these exercises to remove friction, reduce waste, increase productivity and find calm.

1. Get tight with your customer

Spinning your wheels on things customers don’t care about is inefficient. So make sure your efforts align with their needs. Try a brief survey or ask in-person about specific parts of your product or service. They may be indifferent about something that you work really hard on. Try to balance that out.

2. Get clear on what matters

Make sure you’re super clear on the things that matter most to your business. It might be the personal service, quality finishes, attention to detail, or outstanding expertise. Just make sure you know you – and then make sure employees and contractors do too. By internalising your non-negotiables, you’re better able to set priorities for the day and make decisions about where to invest your time, money and mental energy. There may be no more important step to improving efficiency.

3. Write up your process

It’s frightfully boring, but effective documentation ensures everyone knows what to do and how. Make time to create process documents. Involve your team. It’s much faster if the work is shared and their insights will be invaluable. Use templated documents to ensure you capture the same information about each job or process. These records will help everyone understand what they’re supposed to do. And the act of solidifying these ways of working will help you see where inefficiencies lie.

4. Find your bottlenecks

As you and your employees document the existing process, identify which aspects of the job stress you out. Stress is a great measure of how well something works (or doesn’t).

Keep an eye out for obvious bottlenecks. There are a few handy exercises you can use to find bottlenecks:

  • Process flowcharts visually represent each task and its dependencies
  • The Critical Path Method (CPM) prioritises tasks, allocating a time frame for each to see how (and why) things take as long as they do. The Performance Evaluation Review Technique (PERT) goes hand-in-hand with CPM to review how a process works
  • Resource distribution is a way of thinking about how much people need to work in order to get things done
  • The 5 Why Method is another great tool. For each step in a process, ask why it has to happen that way.

Research these techniques and see which works for you. It’ll help create a roadmap to increase efficiency across the business.

5. Redesign your process

With your process problems laid bare, focus on fixing them. It might help to start with the low-hanging fruit so you can build momentum. But don’t shy away from the hard ones either, as they can often yield the biggest gains. For each problem you encounter, consider how it could be helped by:

  • better resourcing or tools
  • more clarity on roles and responsibilities
  • redistributed workloads
  • tighter scheduling and planning
  • resequencing
  • improved communication

6. Train your staff (and let them train you)

It’s not uncommon for employees to be thrown in the deep end, without proper training. Don’t assume they know how to use the tools or do the job just because you told them on their first day. Training doesn’t happen once. It’s continuous.

Time spent upskilling and empowering staff is time you don’t have to spend micro-managing them, or fixing mistakes later. Keep the conversation alive over the long term. As employees learn the business and grow in experience, they’ll begin to advise you where inefficiencies and waste occur, which will help you continue to optimise operations and improve efficiency.

7. Hire or outsource

A skilled employee or business owner who’s locked into low-value tasks is wasted. Consider outsourcing jobs that interfere with your workflow. Or maybe hire more help. This can also be a good idea when you have an expertise gap and find that you’re working really hard on something a specialist could do much quicker.

8. Investigate technology

As with outsourcing, technology can remove distractions that hinder you or your employees. In the case of technology, the costs are typically lower. For example, lots of administrative tasks can be automated using software that costs a few pounds per month.

  • Automated ordering and booking systems enable customers to self-serve
  • Inventory systems track stock levels and automate ordering
  • Remote working tools reduce the need for meetings, travel, and rent
  • Accounting software simplifies record-keeping, reporting, loan applications, and tax filing
  • Invoicing software speeds up billing and chases late payments for you
  • Accounts payable software keeps track of bills, cash flow and payments
  • Time-keeping systems allow you to share rosters and record hours
  • Payroll software calculates wages, deductions and pay slips
  • Online systems simplify version control and eliminate the double handling of information
  • Project management tools streamline tasks, centralise comms, provide real-time updates, and minimise dropped tasks

9. Financing your efficiency improvements

If a problem seems hard (or expensive) to fix, do some financial analysis.

Cost the losses

Work out what it costs you to do nothing. Count the hard losses involved with do-overs, customer refunds or materials waste. But also account for wages wasted during downtime or the opportunity cost of being taken away from new business. You may also want to factor in the mental effects of stress, distraction and frustration that arise from broken processes.

Price to solutions

With the costs now known, you can price the solutions that will improve efficiency. You may need to make investments in the form of:

  • new technology, equipment, vehicles, or renovations
  • support from consultants, engineers or other domain experts
  • training on new systems and processes
  • temporary productivity loss as people adjust to new ways of doing things
  • interest on loans
  • outsourcing

Run the cost-benefit analysis

With the problems and solutions now measured in hard currency, get a bookkeeper, accountant or another financial professional involved. They’ll check your assumptions and your maths before helping you figure out what things to tackle first. If it’s really expensive, they can help decide if it’s worth getting a loan and, if so, they’ll help you prepare the application.

10. Keep searching for increased efficiency

Embrace the imperfection of life, work, and business by keeping a list of the things you can’t fix immediately but you’re aware of. This is not a dumping ground of gripes, nor a bunch of stuff to hang over your head and stress you out – it’s an honest way of bringing your team’s experience into operational efficiency.

Your efficiency is already improving

Efficiency is a mindset. It’s a drive to cut waste, save time, create focus, and absolutely smash the things that matter. Your reading this article shows you have the motivation. And now that you’re done, you also have some tools to take the steps toward a more efficient (and profitable and peaceful) business.

Disclaimer

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

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