Steve Leavitt, General Manager, Exact Online US
There are now more than 650,000 SMB manufacturers and wholesalers in the U.S. and business is up by more than 48 percent since 2009. This growth presents a significant opportunity for accountants especially with smaller businesses that, until recently, saw little need for the services of a trusted professional.
As you turn your attention toward this rapidly expanding opportunity, however, do so with an understanding that two distinct “worlds” exist inside a small manufacturer. First and foremost, there are the business owners themselves who – as you can imagine - care deeply about all aspects of the business.
Middle managers, including shop floor managers, bookkeepers in the front office etc., comprise the other “world,” and they typically have a more myopic focus, which centers more on their discrete role or a current project. Unfortunately, inside many businesses these worlds do not collide – in fact, there is actually a notable lack of communication, collaboration and flow of information.
Accountants tend to work primarily with the business owner, helping them answer questions they care about most: “Am I making a profit?” and “What am I paying taxes on?” If you only spend your time in this one world, however, you’re missing important dynamics that could make you a more effective advisor overall. Spending time understanding what middle managers are doing not only helps form a more comprehensive view of the business, but also helps them see the bigger picture of how the business is performing. By working with and successfully merging these two worlds, accountants can uncover opportunities for greater efficiencies and avenues for new growth, positioning you as a valued partner, not simply an outside vendor.
To effectively merge these two worlds, accountants must first understand the three burdens that small manufacturers routinely face and use these burdens to show managers the real cost involved in any job. This will help mangers see the bigger picture and help them to understand that there is more to a job than just the direct cost that they manager every day. Helping management calculate the correct burdens and then informing the managers on how these reports affect how they manage the bottom line of each job will allow everyone to make more informed decisions.
With these burdens in mind, accountants who are most successful at merging the two very different worlds will focus on four areas that help to increase communication, collaboration and efficiency inside the business.
- Calculate the burdens! Accountants must use the latest tools, technologies and systems alongside their clients to accurately calculate the three major burdens clients are facing. This will lead to the development of necessary steps or recommended adjustments that will drive meaningful business changes. All this information should be shared with everyone in the business – from the owner to the newest shop floor worker.
- Spend quality time with middle management: Spending time with business owners only won’t give you a big picture of business health or opportunity. You must also spend quality time with middle managers, including shop floor workers, book keepers etc., which has the added benefit of helping them see the bigger picture as well. Based on the work that middle managers do, they are in the best position to see where greater efficiencies can be gained. Additionally, understanding how information is used creates a sense of personal responsibility for these folks and helps to ensure that the information is accurate. It is crucial to get the best information possible to base decisions at any level. The bottom line? Investing more time across the organization pays off in a healthier and more agile business moving forward.
- Spend (better) quality time with business owners: Accountants may need to think about better structuring the time they spend with business owners. Resist the pressure to go right to the bottom line on a spreadsheet – encourage owners to pore over each line with you to understand its impact on the business. Focus only on macro questions, such as “am I making a profit,” ignores many dynamic profit drivers - such as more hours, in-house versus subcontracting, performance of subcontractors, employee efficiency and training required, new versus existing customers, and diversification - that could be proactively tweaked to improve performance.
- Recognize different competencies and styles and customize appropriately: No two businesses are alike, so your role will change in each engagement. By engaging with more than just the owner and taking into consideration different work styles etc., you will be able to gain a broader perspective of the business which will allow you to bring the most value to your clients. In some cases, your ability to merge the two worlds of manufacturing may hinge on how you recognize and synthetize different competencies and styles.
A trusted advisor doesn’t play both sides of the fence – they openly merge and synthesize ideas and insights to create a stronger whole. Middle managers see things that could lead to greater efficiencies and profit – be a mouthpiece for them. Major decisions such as outsourcing or building capacity in house, purchasing new machinery, investing in automation, etc. are best when viewed in the largest context possible. Yes, it’s easy to get trapped into running a business by one or two numbers, such as profit and loss, but modern manufacturers can and should go beyond that. And, you can help get your clients there by bringing two worlds together and creating a much stronger, larger whole.
Steve Leavitt, GM of U.S. Cloud Solutions for Exact