E.O.W(End of the Week) Notable Tip: Reduce RFP Lead Times

Happy Friday!

I hope you’ve had a great week.

Today, I will discuss how you can optimize your CRM management process for reducing RFP (request for proposal) lead times while increasing profitability. By developing a client quality plan it becomes easier to vet prospects which makes RFP analysis much easier. RFP lead times (time taken to secure RFP) can be reduced by filtering high quality requests based on your quality plan filters which have lower proposal cycle times, higher profit/margin potential and higher probability of attainability.

Lower proposal cycle times can be attained by collaborating with team members and creating proposal templates that require minimal updates based on average or common project requests. Proposal templates, quality plans, historical and competitive analysis will allow you to budget resources for the purpose of optimizing profits and customer satisfaction. Read our article on Strategic Customer Analysis.

I hope you’ve enjoyed this E.O.W!

As always, “Success is continuous improvement!”

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Days Sales Outstanding: Get Paid Faster tips

You’ve made a sale! That’s great but the customer hasn’t paid and the invoice is now 90 days past due. This scenario is common amongst many businesses. Many businesses resort to offering extended payment terms but this is a bad idea because it affects their cashflow. What you really want is client satisfaction because when the client is happy they will quickly remit payment for the service or product that was provided to them coupled with strong A/R controls and processes that ensure you get paid in a timely manner.

By developing and comparing critical A/R KPI metrics (cost per invoice, process cycle time, payment turn-around, et cetera) to industry and competitor data you are able to realize opportunities for improvement in DSO. Finance executives can use this knowledge to reduce DSO with the company’s capabilities and ability to sustain DSO process controls in mind.

A client’s ability to pay on time is based on their credit risk. Finance Executives should stay abreast of client industry and market shifts, require and create a client financial stability plan when pursuing clients to ensure they are financially stable and are not slow payers. Some companies may be apprehensive about requesting a credit history in fear of losing an attractive customer, however, incentives and credit risk insurance can be offered to offset this possibility.

Payment terms should be made clear to clients by various communications, such as, the invoice itself, on-boarding materials, introductory emails, et cetera. These payment terms should also be in agreement with common industry practice and customer needs and expectations. For example, if clients are billed per retainers/retention, it is best that you require an initial upfront payment. Other ways to safeguard cashflow and ensure faster payment would be to offer broad payment options (ACH, Check, wire transfers, PayPal, Credit Cards, et cetera), payment plans and quick pay discounts.

Overdue receivables should require constant and daily communication with clients to understand the reason for the payment delay, offer payment solutions or optimize value.

The billing process is critical to the reduction of DSO because it should run smoothly. Meaning invoices should be created and sent on time, have no errors, and contain all the appropriate information. Incorrect charges, incorrect rate discounts and mailing addresses are all things that can delay payment. It is also important to update customer profiles in accounting software with contract agreements and up-to-date contact information.

Companies should regularly convey and update their A/R controls and processes. They should utilize the voice of the customer to gather data that can help improve those processes, support clients falling on hard times by offering payment plans, and develop client-centric processes for handling non-paying customers, including guidelines for managing disputes and turning over invoices to a collections agency.

Top management must commit to these DSO reduction efforts and have continuous conversations about A/R controls. They should make these controls visual so that everybody can see them and audit the process periodically. By continuously staying abreast of DSO metrics and making improvements as the industry and company changes will ensure that employees understand how important these efforts are to the company.

Reasons for Lean Six Sigma

Lean Six Sigma allows for the improvement in speed and performance of a process coupled with the reduction of waste and defects. If you ever find your current processes with high rework, client turnover, product recalls/crashes, and a plethora of errors it might be time to change your process design. As you will read below, I have noted a few benefits and reasons for Lean Six Sigma.

  • Lean Six Sigma projects cut costs and expenses by eliminating waste (a result of inefficient or non-value added process steps).
  • Whilst, the reduction of expenses helps companies yield higher revenues and profits. Improvements in quality and delivery also have the potential to increase sales and profit.
  • When waste is eliminated, processes flow seamlessly and delivery times improve.
  • As a process flows more quickly, the amount of inventory needed to keep the process moving is reduced and cash is freed up for investment elsewhere.
  • By improving quality in each process, customer satisfaction is increased.
  • Lean Six Sigma allows employees to work in valued added processes which in turn increases overall internal satisfaction and morale.
  • The cost savings of implementing Lean Six Sigma, compared to the time and resources spent working on a project without Lean Six Sigma is typically 10 to 20 times the investment.

 

Notable Bookkeeping is a certified Lean Six Sigma company. Contact us today to learn more about our process improvement/Lean Sig Sigma services! We work with all industries and all company sizes.

 

Lean Wednesday Tip: Objectives of a Process Improvement Project

“The validity of a well-planned process improvement project is identified through value-added process mapping, problem isolation, root cause analysis and problem solution. Ultimately, the key to refining processes is to concentrate on the process from the customer’s point of view and identify and eliminate non-value added activities.”

Successfully Integrating Value Stream Mapping into Product Development

Whenever there is a new product or service being offered to customers, there is a new process and value stream. Value Streams include both non-value-added and value-added activities and are the actions required to create a product or service from raw material until it reaches the customer. Value Stream Maps are more detailed than process maps as they include details, such as, cycle time, changeover time, uptime, process activities, operator self-inspection notes and customer specifications.

To successfully integrate value stream mapping into product development you must first accurately gather, understand, and specify the value desired by the customer. Collect real time data of the actual pathways of material and information flow. You may have to conduct several walkthroughs, first to assess the entire value stream and then to gather more detailed information. The best course of action is to work backwards as this reduces the probability of missing an activity because it takes place more slowly, without jumps to conclusions of assuming you know what happens next.

It is wise to utilize a pencil, paper and stopwatch when creating a process map. Once you have completed the map, remove the waste. Let the requirements of the customer guide you in making value flow from the beginning to the end of the process. The three most critical KPIs in a value stream map are: cycle time, value creation time, and lead time.

Cycle time refers to the time it takes to complete the overall process. Value creation time is rarely equal to cycle time. It is the time it takes to complete those work activities that actually transform the product into what the customer wants. Lead time is the time it takes to move one piece, part, product or service all the way through the process. All this information should be captured on the value stream map. When the value stream is complete, it will help you identify wasteful activities and realize opportunities for improvement. After you have identified the areas that need improvement, create an improvement plan that clearly states what needs to be done and when, has clear and visual measurable goals and objectives, complete with checkpoints, deadlines, and clear responsibilities.

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