Business failures are all too common. You may be an excellent doctor, accountant, architect or engineer. You may be a specialist in your field, but respectfully, it does not mean you know the nuances of running a successful business. Sadly, mismanagement is one of the primary reasons for business failures.
“Best Practices” are techniques that businesses employ to control costs, stream-line processes and avoid disruptions. Over the years I have worked for three very large companies; and worked with a great many small and medium sized businesses. I have found that small and medium-sized businesses incorporate some Best Practices, but not consistently. However each large Fortune 100 company I worked with incorporated best practices consistently.
On March 6, 2014, CFOTips published a quick 32 question survey to understand the existence of standard best practices in small and medium-sized businesses. Questions were general, so the concepts would have applicability to all responders, regardless of the business model. Select results were as follows –
- To understand the success of your business, it is recommended that an annual business planning process be conducted. But when asked, only 47% of responders had a long-term plan of where they expected to be in five years; while only 47% of responders had a documented, detailed business plan for the next 12 months.
- A best practice for an entity is to annually set strategy for the coming year. This activity requires external information to validate your approach and direction. Interestingly, only 41% of responders conducted competitor surveys; while 59% conducted customer satisfaction surveys; and 41% conducted employee satisfaction surveys. Only 59% of entities conducted an analysis of their place in the market, similar to a Strength, Weakness, Opportunity, and Threat (SWOT) analysis.
- To ensure processes are efficient and reduce expenses, a best practice is to establish policies and procedures and document job descriptions. Only 41% of responders have policies and procedures for most, if not all processes; and 59% of responders have job descriptions.
- To ensure your cash flow is not disrupted, a best practice is to have a collections process and utilize it when required. Based on our survey, only 65% of responders have an established collections process.
- To reduce the risk, of fraud annually a segregation of duties analysis should be performed. Yet only 47% of responders performed a segregation of duty analysis. And to ensure an environment where all employees act on behalf of the company’s best interests, ethics policies should be established, with a system available by which employees can identify unethical behavior. While 75% of responders have an ethics policy, only 35% of responders have a whistleblower program.
- To control costs, periodically vendor agreements should be reviewed to understand what you are paying for and what you are receiving. Yet, only 35% of responders review vendor agreements and company needs periodically.
- But the most surprising results were related to the prevalence of a business continuity plan. Only 29% of responders reported a documented business continuity plan for their business.
Note, as less than 100 responses were received, this information should be considered directional only. How do you compare?© Copyright 2014 Regis Quirin, All rights Reserved. Written For: CFO Tips - What you need to know, to be a CFO TODAY!