Thursday, December 16, 2010

AP: I promise I'll do better next year

Seal of the United States Internal Revenue Ser...Image via Wikipedia
Many people start to wind down a little at this time of year. Calls to customers start to tail off, marketing spend for business-to-business companies slows down, and everybody starts to save their energy for buying a wrapping stuff for the kids. For the poor souls in finance and accounting, this is just the calm before the storm. Financial years come to an end with a flurry of activity, and worse yet, tax season in the US starts to cause pangs of remorse. "Why did I not keep my paperwork more organized through the year?". "What are all these travel expense receipts?". "Can I hide on a small Caribbean island?".

Well, 2010 is almost done. Feel free to spend much of the end of December and all of January running around, finding what you need for your annual reports and IRS filings. But ask yourself, "do I want to be doing this again in twelve months time?". Especially as the new health care reform bill has an impact on the tax reporting of transactions (in the same way that the housing assistance support bill did several years ago), making the accounts payable team miserable. Yes, filing 1099 forms for every vendor that you spend more than $600 with (not just the unincorporated ones)  in the course of the year sounds like running a report or two, then filling in the paperwork - not fun, but not world ending. But wouldn't it be better if you could kill two birds with one stone, fixing your messed up paper and Excel accounts payable and travel expenses processes, and ensure you can meet the 1099 reporting needs more easily?

It seems to be true that despite the hype of the burden on small business, a big chunk of the responsibility for patching up the leaky tax collection problem goes back to big business. The merchant banks, credit card companies, whichever organization handles an electronic transaction, becomes responsible for reporting these transactions. The tax code already demands this, and the requirement appears to have been extended. So, I've been complaining this week that electronic transactions are too costly for small business. Maybe that cost starts to be put into context when I consider the reporting costs in the future if I write a lot of large checks.

Its time to get ahead and start streamlining those accounts payable processes. Its really not going to be that hard, compared with the year end chaos that ensues anyway. And it could make 2011 a more restful and peaceful year, for accounts payable at least.

Remember: I know nothing about tax law or any other regulations affecting your business. So check with a professional before doing, or not doing anything.

A post from the Improving It blog
Let us help you improve your business today. Visit

Tuesday, December 14, 2010

Logo of PayPal.Image via Wikipedia
Yesterday I discussed why electronic payments are great for customers and banks, but terrible for small businesses dealing in high value, low volume transactions. This morning, Finextra relays the press release announcing the partnership of S1 and PayPal. S1 provides integration with online banking, so that person-to-person payments can be made directly from an individual's bank account. The actual payment is made through the PayPal infrastructure, giving the security and support that is needed for this to actually fly.

This news is interesting, since it is giving smaller institutions such as credit unions the opportunity to offer competitively priced money transfer capabilities. It starts to put in place a real competitor to the legacy fund automated clearing house (ACH) and wire transfer systems used by the banks for Electronic Funds Transfer. EFT is perceived as being highly complex and may be considered one reason why electronic payments are going to be such an expensive proposition for small businesses. If you make a payment to a small business electronically through an online banking site such as Bank of America, its likely that the bank prints and mails a check. The small business owner has the inconvenience of the paper check still. This is not an end to end electronic solution, it just suits the customer, and the bank gets to hold your money for longer.

If PayPal and S1, or similar propositions start to really compete in the marketplace, I hope this could put pressure on the big banks to start providing better and cheaper check-free approaches for business to business payments, completely integrated with real small business online banking. This is what small businesses want, direct integration, not another service that they have to transfer funds to so they can pay a third-party. The rather hefty charges, and complexity of funds transfers to the PayPal account before making the payment need to be reduced, and competition is the only way it will happen.  

A post from the Improving It blog
Let us help you improve your business today. Visit

Monday, December 13, 2010

Electronic payments - a cost of doing business for SMBs

An example of street markets accepting credit ...Image via Wikipedia
Electronic payments such as credit cards, debit cards and PayPal are outnumbering check payments in the US. Debit cards, counted the highest non-cash transactions, at 37.9 billion payments, while checks dropped significantly to 27.5 billion written in 2009. This is according to a short article in Financial Services Technology

This all sounds great for businesses, since electronic payments are so much easier to handle, receive and reconcile than checks. But electronic payments come at a cost. 2.9% of the transaction is what a small vendor will pay for merchant processing. Despite the efficiencies involved, this is a big chunk of change, especially if you are dealing in a small number of high value transactions. 

As check usage continues to plummet, and customers start to demand electronic payments from even small vendors, it seems that all the benefits sit with the consumer and the middle man processing the electronic payments. Eeking every efficiency possible out of the use of the electronic payment system is perhaps the only way that small vendors will be able to make up the gap. Process improvement in Accounts Receivable and Accounts Payable become essential areas to focus, especially as the paperwork burden to manage a 1099 for every vendor receiving over $600 in transactions in a year could come into effect.

If small businesses have recommendations of how they receive and pay for large transaction goods and services electronically, please leave a comment.

A post from the Improving It blog
Let us help you improve your business today. Visit

Thursday, December 09, 2010

You can't build BPM

The BPM forum on ebizQ today asks:
A question from this blog, What's Better - Building a BPM Solution or Buying One? and an important question for companies looking to take the BPM leap. And what metrics should they use to make the decision?

Build or buy will be driven ultimately by the preferences of the organization. 

1) completely tailored, business wide processes
2) solving specific business problems

If you need #1, then almost certainly you'll be buying an enterprise BPM suite, and building a lot of integration into your environment. BPM software is really a set of repeatable building blocks, made general enough to match common requirements for many business processes, not just those of one business. Therefore it seems hard to envisage building a BPM internally. Really what a business should be doing if it is looking at building software is using BPM methodologies alongside other requirements analysis approaches, and building just what is needed to make the solutions work in practice and make them maintainable in the future.

Smaller companies can do a lot more, since they are less likely to be driven by technological ego. There are many SaaS solutions that solve #2, common business problems, without building anything or even designing and 'configuring' new business processes. For example, why bother creating a travel expenses process from scratch, when there are many SaaS solutions available off the shelf? 

When custom processes are absolutely necessary for SMBs, an enterprise BPMS is not going to be a good fit. Even the software vendors don't use their own software, due to its complexity and cost to implement ( see my blog post about a dirty little secret )

Finally, a guarantee of success should be something you can measure. Building anything adds risk to this equation. If the solution is the right size for the problem, there should be an ROI up front, which you can balance against the risk of build-or-buy. Soft benefits alone, like customer service improvements, does not make an investment invalid, just harder to justify ( see a quick animation that explains this from the perspective of the value chain ).

Build or buy of BPM is not the question. Companies should be asking themselves where their problems are and the fastest and best ROI for fixing them.

A post from the Improving It blog
Let us help you improve your business today. Visit

Wednesday, December 08, 2010

Enough is the best

MUJI logoImage via Wikipedia
Is 'Enough' the new 'Best'? That is the question asked by Idris Mootee on Blogging Innovation this morning. I have long been a proponent of "good enough" for business processes, which would be probably taken out of context in a sound bite, so don't quote me quite yet.

Mootee discusses the Muji stores in Japan, the non-brand brand that espouses the idea that as consumers there is stuff we need and want to buy, but why do we have to be forced into believing that one label makes a product better than another? Brands are there to do this, without adding any value to the actual thing that is being bought. 

Unfortunately business improvement strategies have taken the branded non-value add approach. We have branded our business improvement methodologies, Lean and Six-Sigma are two common examples, to add caché. Hell, we even retained the Japanese-named concepts that came out of the manufacturing philosophies that don't always translate well into western thinking, because it makes the approach sound cool. What, after all, is wrong with translating concepts into plain English to make them accessible to a wider audience, rather than forcing people to buy expensive training and textbooks?

Strangely enough, despite maintaining a significant amount of branding to make its concepts sound bigger than sometimes they are, Lean really does follow the concept of 'enough is enough'. Maybe not 'enough is best', but knowing when to stop to avoid wasting effort in removing wasteful activities from your business processes. So, going back to my likely to be quoted out of context quote, "good enough" really has some value. The question is, do you want to spend money making one process that is performed close to perfect when the rest of your business needs some serious fixing? It is like seeing a house with a beautiful kitchen complete with granite and stainless steel, but the stairs leading up to the bedrooms are collapsing. 

Small and medium-sized businesses should be especially sensitive to this pursuit of perfection in their processes. There is typically not spare cash to be invested in business improvement. Surprisingly, sometimes the best way to get bang for the buck is to do several things at once. Make sure you reach a milestone where the work done on a project is useful, but have enough measurable objectives in place to understand which of the simultaneous projects is really going to achieve what you want. Your understanding of what is important changes as your processes improve. 

Like branding, sometimes a single laser-like focus on one project ends up dragging you into a endless cycle of polishing and perfection. Mootee may be right, at least in my view: "Enough" is the new "Best". You can quote me on that.

A post from the Improving It blog
Let us help you improve your business today. Visit

Tuesday, December 07, 2010

A world without people is not a fun place

Workflow/Business Process Management (BPM) Ser...Image via WikipediaBusiness process improvement is fundamental to the best performing companies, although we rarely hear or talk about it. Instead we focus on how great the employees are, how they are trained to deliver great customer service, and how well their leaders inspire their people work better. Maybe it is because consumers of services are human-beings that we focus on the people part so much. Or maybe it is because so much of the focus of business process improvement has been in the mechanization, automation and general dehumanization of business processes that we have become immune to its benefits. Business processes are seen as tools that should just work, when we should be looking at them as better systems that involve talented people

The thing is that business processes, unless you are talking about straight-through processing (STP) and ultimate automation, include people. This isn't about the marketing that we are seeing from business process management (BPM) vendors, classifying themselves as "leader in human-centric BPM for Java platforms", or some other ridiculous classification that allows somebody to be the leader in a niche that is unimportant to real business users. This is about helping people do their jobs better within processes, and helping people understand the processes that they work within so that they can make them better.

Linus Fernandes on his blog, Rubber Tyres -> Smooth Ride looks at it this way:
Most new software system implementations require people to be trained or re-trained; they have to understand why the new way of doing things is better, how it will make them more productive, how it affects the bottom-line. [...]
Yes, BPM can work, it does work, but it’s necessary to recognise the other associated costs especially with human capital.
The more fundamentally you try and change your processes, the more likely it is that you will need to train or employ specialists to understand and run them. Whereas, if you can keep your processes more natural, rather than something-centric, the more likely it is that you'll be able to benefit from the skills and experience your employees already have. Allow people to do the things that require intelligence and human-interaction. Feel free to automate other parts, but don't feel bullied into it by software marketing. If there is no value in automation, just help people work better by providing them the information and tools they need to produce a quality product or serve customers better. 

A post from the Improving It blog
Let us help you improve your business today. Visit
Enhanced by Zemanta

Friday, December 03, 2010

Why bother with DIY BPM?

Companies that have tried improving their business processes, either through manual improvements or software BPM solutions, know that the DIY approach can be a big time-suck. So why bother? Everybody looks at the return on investment in projects based on hard costs, and the costs with in-house software are never small. But few people look at the costs on your time, the business person who desperately wants things to change, but can not spare the time to think about things deeply enough to make the changes useful rather than plain damaging.

I've been chatting with Ian Lever at Forward Look about alternatives to IT-centric BPM tools for business improvement. To steal one of his thoughts: why would you invest in building a leave/vacation request process, a travel expense process or a time sheet system using internal IT and business users, when there are a hundred low cost, ready made alternatives out there already? For many large companies, it seems easier to call the ERP vendor and have them enable the module and customize it to your needs (for tens of thousands of consulting and licensing costs), rather than suffer the indignity of going online and signing up for an easy to use system that doesn't really integrate  (but doesn't need to) to your ERP. Burn some IT budget and get something in six months, that's the only way to go for many locked in by their IT department. For the rest of us, where that one project spend like this would exceed the annual IT budget, build versus buy becomes a big question. Doing it yourself is not always the cheapest way to achieve the goals, and unless you are really handy with the tools it is rarely going to achieve the highest quality result.

For this reason, software as a service (SaaS) vendors exist to deliver solutions for what you need. This isn't like the BPM vendors and their 'templates'. This is real running solutions, ready to go. For this reason, Consected will be announcing some new Instant Apps. Look out for these new, free and low-cost apps at Consected Instant Apps.

"Great!", you say, "but nobody does what I want, my way". Well, if you really have faced that problem with the lack of appropriate SaaS solutions for you specific business need, add a comment below or contact me (select 'customer service', since I'm not in sales mode), and share your ideas, wishes or gripes with me. A problem shared... 

A post from the Improving It blog
Let us help you improve your business today. Visit