Is BPM a viable strategy for SMEs?
Business process management, or BPM, is a hot topic in the business community. With many “blue chip” companies (that have traditionally been financially strong, produced consistent earnings and kept moderate debt) struggling in the current economic environment, business leaders have turned their focus onto improving the processes within their company. While BPM is systematic, rather than simply involving haphazard changes – and has largely been applied by larger, complex organisations – its key principles can provide valuable insights to SMEs looking to operate more efficiently and effectively.
Processes and standardisation
Before getting onto BPM, it’s important to understand a couple of key terms. In the context of a business, a process is a set of related tasks undertaken to achieve a specified outcome. Standardisation involves creating a defined set of solutions to particular problems, intended for use by a group of people in a certain context. Process standardisation, therefore, involves the application of standardisation to the processes within a business.
What is BPM?In short, BPM involves defining and improving the processes within a business in order to increase discipline in operations, align resource use and strategy towards meeting goals. Defining processes, with the aim of improving them, requires standardisation: it is impossible to measure how well a process is working, and find ways of improving it, if it is carried out in a different way each time.
A customer-centric way of thinkingBPM is not so much a methodology, as a discipline. While a methodology involves developing specific procedures to solve problems, a discipline is a way of thinking and acting. In the case of BPM, this involves taking a customer-centric approach to how you think about and develop processes in your business. While the traditional approach is linear – looking at a process from start to finish – a customer-centric approach inverts this. You start with the customer, and how your product or service provides value to them – this can include everything from quality to delivery time – and then work backwards. That is, you ensure each of your processes is designed and carried out with the aim of maximising value to your customer.
Where BPM efforts should be focusedWhile almost any process can be improved, each iteration takes time and money, so knowing where to start, and focus most of your efforts, is vital. Using a customer-centric approach clarifies this. Only 15-20% of processes are competitive; that is, provide significant value to your customers. This will differ from business to business, so getting feedback from your customers about what they like and dislike about your business – say, high quality but slow delivery time – will help you to optimise your business processes.
Effective and efficient processesOf course, providing value is not the only thing that enables business success. If you spend so much on business processes that you cannot turn a profit, it won’t be much good. That is why efficacy – delivering products or services according to standards, must be balanced with efficiency – minimising the resources used in relevant processes. In other words, when investing in improving processes, ensure that the returns (in efficacy and efficiency) will be greater than the amount invested.
So, is BPM viable for SMEs?In short, yes. While BPM in larger companies is often connected to substantial investments in technology and automation, due to the scale and complexity, if you can identify processes that don’t deliver the value to customer that they could, and work backwards through these processes to improve them, you can implement BPM.
Implementing BPM in your financingOne area where SMEs often struggle to provide equal value to their larger competitors results from cashflow problems. Unlike larger businesses, SMEs may be able to meet large orders, or provide extended credit terms, but they struggle to do both simultaneously. Having to wait 30-120 days for payment, while needing working capital for supplies and other operating costs immediately, can make matching the terms that big businesses offer impossible. Therefore, starting with the value provided to the customer – delivery scale and credit terms – SMEs need to implement a financing process to meet these demands.
Factoring offers an all-in-one solution. With factoring, your business sells its accounts receivable to a third-party organisation, who collects these when they are due. This provides you with cash-on-hand to deliver the scale and credit terms that your customers require. Moreover, when you partner with Merchant Factors, all credit control and debtor administration services are taken care of. This takes care of accounts receivable with a single, effective and efficient process – so you can focus on optimising the core processes in your business.For fast, flexible business finance – contact Merchant Factors today.
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