How to increase efficiency in a business: 10 ways

Published Monday 16 March 2026

Table of contents

• What is business efficiency?
• Types of business efficiency
• How to measure business efficiency
• 10 proven ways to improve business efficiency
• Use Xero to improve your business efficiency
• FAQs on improving business efficiency

Key takeaways

• Document your current processes by involving your team to uncover hidden inefficiencies, as over 70% of employees rarely participate in process improvements despite having valuable insights about bottlenecks and waste.
• Automate repetitive tasks with technology tools like accounting software, invoicing systems, and project management platforms, which can save up to 200 hours per employee annually and deliver ROI of 248% over three years.
• Calculate the return on investment before making significant efficiency improvements by comparing the cost of current inefficiencies against solution costs to prioritize changes that pay off fastest.
• Build continuous efficiency reviews into your regular operations rather than treating improvement as a one-time project, maintaining a list of issues to address and scheduling monthly or quarterly assessments with your team.

What is business efficiency?

Business efficiency means getting more results from fewer resources: less time, less money, and less effort, while maintaining or improving quality. For small business owners, efficiency directly impacts profitability, work-life balance, and your ability to scale.

When your business runs efficiently, you spend less time on admin and more time on the work that matters. You reduce errors, cut waste, and free up cash flow for growth.

Types of business efficiency

Small businesses can improve efficiency in three main areas. Understanding each type helps you identify where to focus first.

• Operational efficiency: Streamline workflows, reduce bottlenecks, and deliver products or services faster with fewer steps
• Financial efficiency: Manage cash flow better, reduce costs, and improve profit margins without cutting quality. According to McKinsey, businesses using financial automation can achieve efficiency improvements of 20–30% in the first year alone.
• Time efficiency: Spend less time on repetitive admin tasks and more time on strategic activities that grow your business

These three types connect to each other. When you automate invoicing (operational), you save hours each week (time) and get paid faster (financial).

How to measure business efficiency

Measuring efficiency establishes your baseline and proves whether improvements are working, yet it's an area many businesses overlook. Research shows that only 19% of managers consistently use key performance indicators (KPIs) to manage their business processes. Track these key metrics to monitor progress:

• Time per task: How long does each process take from start to finish?
• Cost per output: What does it cost to deliver one unit of your product or service?
• Error rate: How often do mistakes require rework or corrections?
• Revenue per employee: How much revenue does each team member generate?
• Customer satisfaction: Are customers happy with delivery speed and quality?

Start by measuring one or two metrics that matter most to your business. Use accounting software with real-time dashboards to track these numbers without manual calculations.

10 proven ways to improve business efficiency

Once you understand what efficiency means and how to measure it, apply these ten strategies to transform your operations. Start with the areas causing the most frustration, then work through the rest over time.

1. Get tight with your customer

Working on things customers don't value wastes time and resources. Align your efforts with what actually matters to them.

Try these approaches to understand customer priorities:

• Run a brief survey asking about specific parts of your product or service
• Ask in-person during sales or service interactions what they value most
• Review feedback patterns to spot what customers mention repeatedly

You may discover they're indifferent about something you work hard on. Redirect that effort toward what they actually care about.

2. Get clear on what matters

Knowing your non-negotiables helps you prioritize daily decisions about where to invest time, money, and energy. This may be the most important step to improving efficiency.

Identify what matters most to your business:

• Personal service: Do customers choose you for the relationship?
• Quality finishes: Is craftsmanship your competitive edge?
• Attention to detail: Do clients expect precision?
• Outstanding expertise: Is specialized knowledge your value?

Once you're clear on your priorities, make sure employees and contractors understand them too. When everyone knows what matters, decisions become faster and more consistent.

3. Write up your process

Documenting processes ensures everyone knows what to do and how, but many businesses miss a key opportunity for insight by not involving their staff. According to one study, over 70% of employees never or only occasionally participate in improving processes, which means inefficiencies you might otherwise miss remain hidden.

Follow these steps to document your workflows:

• Involve your team: They have insights you don't, and shared work goes faster
• Use templates: Capture the same information for each job or process
• Start with high-impact processes: Document the tasks that happen most often or cause the most problems
• Keep it simple: A one-page checklist beats a manual no one reads

The act of writing down how things work often exposes where they don't.

4. Find your bottlenecks

Bottlenecks are points in your workflow where work slows down or piles up. Stress is often a reliable signal: if a task frustrates you or your team, it's worth examining.

Use these methods to identify where inefficiencies hide:

• Process flowcharts: Map each task and its dependencies visually to spot delays
• Critical Path Method (CPM): Assign timeframes to each task to see why things take as long as they do
• PERT analysis: Review how each step in a process actually works versus how it should work
• Resource distribution: Examine how much each person needs to work to complete their tasks
• The 5 Why Method: For each step, ask "why does it happen this way?" five times to find the root cause

Choose one method that fits your business and use it to create a roadmap for improvements.

5. Redesign your process

Redesigning processes turns identified problems into working solutions. Start with quick wins to build momentum, then tackle harder problems that yield bigger gains.

For each bottleneck you've found, consider these solutions:

• Add better tools or resources: Invest in equipment or software that removes manual steps
• Clarify roles and responsibilities: Make sure everyone knows who does what
• Redistribute workloads: Balance tasks so no one person becomes a bottleneck
• Tighten scheduling: Set clearer deadlines and build in buffer time
• Resequence steps: Change the order of tasks to reduce waiting or handoffs
• Improve communication: Create clearer channels so information flows faster

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

Proper training reduces the time you spend micromanaging or fixing mistakes. Don't assume employees know how to use tools or complete tasks just because you explained it once.

Training works best when it's continuous, not a one-time event. Follow these practices:

• Revisit key processes regularly: Skills fade without reinforcement
• Create reference materials: Give staff something to check when you're not available
• Ask for feedback: Employees see inefficiencies you might miss
• Empower problem-solving: Let staff suggest improvements to their own workflows

As employees grow in experience, they become valuable sources of insight about where waste and inefficiency occur, yet this feedback is often underutilized. Research suggests that in about 74% of businesses, processes are not improved based on identified problems and weaknesses, representing a major missed opportunity.

7. Automate with technology

Automation removes time-consuming manual tasks, reduces errors, and frees your team for higher-value work. For example, a Forrester study found that automating repetitive tasks could save 200 hours per year for each employee. Many tools cost just a few dollars per month and deliver immediate time savings.

Here's how different tools can transform your efficiency:

• Customer self-service: Automated ordering and booking systems let customers help themselves
• Inventory management: Track stock levels automatically and trigger reorders before you run out
• Financial management:Accounting software simplifies record-keeping, reporting, and tax filing
• Billing and collections:Invoicing software speeds up billing and chases late payments automatically
• Bill payment:Accounts payable software tracks what you owe and manages cash flow
• Payroll processing:Payroll software calculates wages, deductions, and pay stubs
• Time tracking: Share rosters and record hours without paper timesheets
• Remote collaboration: Reduce meetings, travel, and office costs with cloud-based tools
• Project management: Centralize tasks and communications so nothing falls through the cracks

Start with one or two tools that address your biggest time drains, then expand from there.

8. Hire or outsource

Skilled people locked into low-value tasks represent wasted capacity. After you've optimized processes and implemented technology, consider whether you need more hands.

Choose the right approach based on your situation:

• Delegate to existing staff: Shift low-value tasks to team members with capacity, freeing up your time for strategic work
• Outsource to specialists: Hand off tasks like bookkeeping, marketing, or IT to experts who complete them faster and better
• Hire new employees: Add permanent capacity when workload consistently exceeds what your current team can handle

Outsourcing often makes sense when you have an expertise gap. A specialist completes in hours what might take you days to figure out.

9. Calculate the ROI of efficiency improvements

Financial analysis helps you prioritize which problems to fix first and justifies investments that seem expensive upfront. For instance, a Forrester study on process automation found that businesses achieved an average ROI of 248% over three years, with a payback period of less than six months.

Cost the losses

Calculate what inefficiency costs you right now:

• Direct losses: Do-overs, customer refunds, wasted materials
• Labor costs: Wages paid during downtime or for fixing mistakes
• Opportunity costs: Revenue lost while you're stuck on admin instead of new business
• Hidden costs: Stress, distraction, and frustration that drain energy and focus

Price the solutions

Once you know the cost of doing nothing, price potential fixes:

• Technology investments: New software, equipment, or systems
• Expert support: Consultants, engineers, or specialists
• Training costs: Time and resources to learn new processes
• Transition period: Temporary productivity dip while people adjust
• Financing costs: Interest on loans if needed
• Outsourcing fees: Ongoing costs for external services

Run the cost-benefit analysis

Compare your losses against solution costs to see which changes pay off fastest. Get a bookkeeper or accountant to check your assumptions and help prioritize. If improving something requires you to invest significantly, they can help you decide whether a business loan makes sense and help you apply.

10. Keep searching for increased efficiency

Improving efficiency is ongoing, not a one-time project. The best-run businesses continuously look for ways to reduce waste and save time.

Build efficiency into your regular operations:

• Maintain a list of things to improve: Track issues you can't fix immediately but want to address later
• Schedule regular reviews: Set monthly or quarterly time to assess what's working and what isn't
• Involve your team: Ask employees to flag inefficiencies as they spot them
• Celebrate wins: Acknowledge improvements to keep momentum going

This list isn't a collection of complaints: it's a practical tool for turning your team's daily experience into operational gains.

Use Xero to improve your business efficiency

Many of the efficiency strategies in this article become easier with the right accounting software. Xero helps small businesses automate financial tasks and reclaim time for growth.

Here's how Xero supports your efficiency goals:

• Automated bank reconciliation: Save hours each week on manual data entry
• Real-time dashboards: See cash flow and business performance at a glance
• Integrated invoicing and bill payment: Streamline financial workflows in one place
• Cloud-based access: Work efficiently from anywhere, on any device
• App integrations: Connect your other business tools for seamless workflows

When you automate how you manage finances, you spend less time on paperwork and more time running your business. Ready to see how much time you can save? Try Xero free for 30 days and experience accounting software built for small businesses like yours.

FAQs on improving business efficiency

Still have questions about improving efficiency in your business? Here are answers to common concerns.

How much should I budget for efficiency improvements?

Improving efficiency ranges from free to requiring significant investment. Documenting processes and prioritizing better cost nothing but time. Start with low-cost, high-impact changes and calculate ROI before investing more. Many tools, including Xero, offer free trials so you can prove value before committing.

How long before I see results from efficiency improvements?

Timeline varies by what you're improving. Documenting processes and training show results in two to four weeks as people adopt them. Automating with software saves time immediately, with full optimization in one to three months. Redesigning major processes takes three to six months to implement completely. Start with quick wins to build momentum.

Should I improve everything at once or prioritize?

Prioritize rather than tackling everything at once. Start with quick wins that build momentum and prove value. Then address high-impact bottlenecks, even if they're difficult. Use cost-benefit analysis to rank what to improve by ROI and plan changes in phases to avoid overwhelming your team.

What if my team resists efficiency changes?

People usually resist because they fear the unknown or haven't been trained adequately. Involve your team in identifying problems and solutions: they see issues firsthand and feel ownership over what they improve. Communicate why changes matter and how they'll reduce daily frustration. Provide thorough training and start with small pilots to demonstrate success before a full rollout.

Can I improve efficiency without spending money?

Yes, you can improve many things for free or at low cost. Document and standardize your processes. Clarify roles and priorities. Eliminate unnecessary meetings or approval steps. Cross-train team members and conduct regular reviews to identify waste. Even improving things for free requires you to invest time, but you typically see returns quickly.