Ever wondered where your profit actually disappears to?
Business owners will likely know how much money they made last month to the penny. Try asking them how much their disconnected software costs them monthly. You’re likely to receive a staredown.
That’s the problem.
Disconnected systems never send you an invoice, but they don’t appear as a line item on your profit and loss statement either. They quietly eat away at your margins in missed hours, double data entry and bad decisions based on information that was true two weeks ago, but no longer.
The good news?
Once you know where the leaks are, they are surprisingly easy to plug.
What you’ll uncover:
- Why Disconnected Systems Cost More Than You Think
- Where Small Business Margins Actually Leak
- What An In-Memory Database ERP Changes
- Warning Signs Your Business Has This Problem
Why Disconnected Systems Cost More Than You Think
Here’s how it happens in almost every growing business…
You begin with accounting software. Someone throws together a spreadsheet for inventory. Sales wants a CRM. Somewhere along the line you tack on a quoting tool, standalone payroll system and a shared drive tying it all together with prayers.
None of them talk to each other. So your staff become the integration layer.
It’s costly work. Studies by Harvard Business Review showed that workers toggle 1,200 times daily between apps and websites. They waste almost four hours each week simply getting back into the groove of what they were doing. Approximately 9% of the workweek is spent before anyone actually accomplishes something productive.
Mountains keep getting made of molehills. Okta’s yearly research just reported the average company runs 101 apps, after hovering below 90 for years.
That’s why eventually most successful growth companies migrate to a single in-memory database ERP platform. Rather than having a dozen tools try to guess what the others are doing with their data, an in-memory database ERP maintains finance, sales, inventory and purchasing records in one system and computes those records directly in memory instead of reading them slowly from a disk. Leading small business platforms like sap b1 are built upon this architecture, which is why that stock and margin report that used to take an entire afternoon can be returned while you’re still on the phone with the customer.
Where Small Business Margins Actually Leak
Margin doesn’t disappear overnight. Margin drips away when no one is looking.
You Pay Twice For The Same Work
Someone calls in an order over the phone. Someone else keys it into the sales system. Another person has to re-key it into accounting. Someone updates a stock spreadsheet.
Same information. Three times. Three chances to get it wrong.
For a team of 10, that sort of duplication can silently consume the equivalent of one salary every year. And you’ll never see it on any budget because it’s allocated to each person’s day in 10 minute increments.
Stock You Can’t Actually See
Disconnected inventory might be the most expensive problem a small business can have.
If your stock quantities are living in a spreadsheet that updates every Friday, then you are either overstocking or promising customers items you cannot fulfill. Either way you are losing money. Overstocking means your money is tied up in inventory that could be used for other things. Understocking means your customer will just go buy it from your competitor who DOES have it in stock.
Invoices That Quietly Slip Through
Ask any bookkeeper… Every disconnected business has invoices that never went out.
Work completes in System A. Nobody marks it billable in System B. Months pass. Someone eventually notices, but the client’s gone and pursuing payment is awkward. Margin lost outright.
Decisions Made On Old Numbers
This is the one that really hurts.
McKinsey research indicates employees waste approximately 1.8 hours per working day searching and retrieving information. By the time information reaches your desk it’s already outdated. Pricing decisions are made based on information that’s too old. Hiring decisions are made on stale data. Purchasing decisions get made on an obsolete picture of the business.
What An In-Memory Database ERP Changes
An in-memory database ERP does more than deliver “better software”. It transforms how data flows through your organization.
Legacy systems read and write everything to disk and retrieve it when needed. Hence long reports run slowly. ERP with in-memory database keeps working data in memory so computations that took hours can be done in seconds.
Here’s why that matters for your margins…
One Version Of The Truth
When sales, finance, purchasing and the warehouse all read from the same record books, arguing about whose number is right simply doesn’t happen anymore. Meetings are shorter. Decisions are made faster.
Answers While They Still Matter
With realtime reporting you can view gross margin by product, by customer or by job today, not three weeks after the quarter ends. Identifying a job running at 4% margin while it is still open is worth much more than discovering this fact later.
Fewer Hands On Every Transaction
A linked up system quotes to an order, which goes to a delivery note, which converts to an invoice. Most of the rekeying is gone. Less touches equals less errors. And less errors means less credit notes eating away at your margin.
Room To Grow
Disconnected systems don’t scale. Every employee needs to re-learn which spreadsheet to believe and who to call. A connected system allows you to double your order size without doubling your admin staff.
Warning Signs Your Business Has This Problem
Not sure whether any of this applies to you? Watch out for these:
- Month-end close takes more than a week
- Two departments quote different numbers in the same meeting
- Somebody’s job is mostly copying data between systems
- Stock counts never match what the system says
- Key reports live in a spreadsheet only one person understands
- Customers hear “let me check and call you back” far too often
If three or more of those sound like systems you have that never connect: You’re losing money.
Tying It All Together
Disconnected systems are the silent killer of margin in the small business. There’s no alarm that goes off and you don’t get any invoices. Just a gradual bleed of lost hours, outdated data and do-overs that everyone chalks up to “we’re just really busy right now.”
To quickly recap what’s actually happening:
- Your staff are doing work your software should be doing
- Your numbers are old by the time you act on them
- Your errors cost more than the fix ever would
Moving to a connected, real-time system isn’t going to fix every issue your business faces. But it will stem the tide. And for most small businesses, stopping those silent leaks is a lot quicker way to improve your margins than by driving more sales.
Begin by quantifying the time your team wastes transferring data. It’s invariably larger than you think.
