Are you suffering from Shop Blindness?

This afternoon, Scott Huston from my office, told me about how in his previous job as a Manager of a Woolworths Liquor Store, he and his team would regularly act as customers and walk the aisles of their stores and stand in front, rather than behind the sales counters.

Why did they do that exercise? To change their perspective and wake up from "Shop Blindness" where you become oblivious to problems in your environment such as signage mistakes and inefficient stock positioning.

Could you be suffering from Shop Blindness in your business? Very likely.

Another way to look at this is to accept that there are aspects of your business you could easily improve but only if you knew there was a problem to fix.

At Axsapt we come across this whenever we run training courses for our customers. We're amazed at the inefficient processes people use in their businesses when their current software can often automate complex processes.

On some occassions our customers ask us to review their systems and without fail we are able to recommend improvements to their processes that can save them money in some cases and nearly always time.

More information: Axsapt

Human Resources

Without any doubt, your most important business asset is your personnel and it goes without saying you should look after your team.

Most businesses use a Payroll System but in our experience very few small to medium businesses use a Human Resources system.

What does a HR system typically record?

• Aspirations
• Credit Cards
• Disciplinary Actions
• Grievances and potential hazards
• Staff Groups such as Profit Sharing, First Aid, Social Club, OH&S Committees
• Medical Details such as Blood Groups, Allegies and Dietary Requirements
• Languages spoken
• Licenses held
• Locations
• Occupational Health and Safety (details of injuries)
• Performance Reviews
• Positions held by each employee since commencement
• Motor vehicles, Notebooks, clothing, phones and other property held
• Qualifications and Skills
• Training Courses available and attended

There are some good dedicated HR systems but the best option is to use one that is fully integrated with the Payroll system to avoid having to re key employee details in twice.

More information: Axsapt

Looking after your assets

Probably the most neglected accounting aspect of small to medium sized businesses is the recording of fixed assets such as Manufacturing Plant, Office Furniture and Equipment, Motor Vehicles, Fixtures and Fittings, Leasehold Improvements and Buildings.

Typically a business relies on their external accountant to maintain their depreciation schedules for them on an annual basis. Not that there is anything wrong with that, except that with minimal investment in a good Fixed Assets system, the business can produce meaningful reports on demand and reduce the risk of losing valuable assets.

A good fixed assets system will link into the base accounting system to minimise rekeying of data, such as monthly depreciation entries and profit and losses arising from disposals/sales of assets. The system should also track both Accounting and Tax depreciation rates and calculations on the basis of Prime Cost or Straight Line and Diminishing Values.

When selecting a fixed assets system, ensure that it supports Asset Pooling, where low value assets are often allowed to be depreciated as a group using the diminishing value method.

Some fixed asset systems go even further and track service history and scheduled maintenance requirements.

More information: Axsapt

Branch and Activity Accounting

One area entry-level accounting systems don't handle particularly well is a segmented General/Nominal Ledger.

Most larger businesses operate over a number of regions, branches or departments and within these are multiple activities. Accounting for these sorts of businesses is usually handled within one legal entity's accounts by segmenting each general ledger account as follows:

CCCCCC-BB-AA

where CCCCCC is the Chart of Accounts, BB is the Branch and AA is the Activity.

The Chart of Accounts represents the standard representation of the summary ledger accounts that form the basis of the company's Profit and Loss and Balance Sheet.

The Branch is typically a distinct business owned by the company with a similar business model as other branches in the group.

Activities are business units within each branch, such as Sales and Marketing, Administration and Finance.

Where there are business expenses incurred that relate to multiple branches and activities, some accounting systems have the automatic capability of allocating these expenses to each branch and activity on the basis of a pre-defined proportion.

Reporting is another area that is handled better by segmented accounting systems. For example, you can usually produce a Profit and Loss Report and Balance Sheet for

• Specific Branches for all Activities
• Specific Branches for Specific Activities
• All Branches for All Activities
• All Branches for Specific Activities

The most common benefit of adopting a segmented accounting system is the production of more meaningful results to enable Management to assess the relative success or failure of individual business units and regions.

More information: Axsapt

Lot Tracking and Shade Matching

One of the challenges faced by ceramic tile and other building products distributors is ensuring each product type supplied has exactly the same colour shade.

Why is this important? Imagine walking into a large hotel foyer and noticing a difference in the shade of floor tiles from one side of the room to the other.

Even though Quality Controls ("QC") processes ensure consistency within and across multiple production runs, there will often be very small variations in the colour dyes used and overall shade due to the variability of clay, sand and other natural components. The QC process ensures products are graded and packaged into similar shades and identified with a batch number for tracking purposes.

To ensure customer orders are supplied with product manufactured from the one production batch (and shade), distributors adopt either manual warehousing records or an accounting system that handles multiple lots/batches across each product.

Some more powerful accounting systems even identify the actual bin location or aisle and level on the pick list to speed the warehouse pick and pack process.

More information: Axsapt

Audited Systems

One key area that distinguishes entry level systems from more capable mid-tier systems is the auditability of the system and in-built system controls to restrict and detect major fraudulent activity.

For instance, it is possible for accounts payable officers to change the BSB and Account Numbers of supplier records, then make a payment run and electronically transfer funds to their own bank accounts. They can then cover their tracks by changing the BSB and Account Numbers back to the original values.

At Axsapt we provide Audit Logging Utilities that record changes to supplier records and trace them to the user and even the workstation they logged on when the change was made. An Audit Report can be produced at any time that lists a change log.

If required, any unauthorised changes can be alerted to key management as soon as they occur.

More information: Axsapt

Middleware - Bridging Disparate Systems

As businesses evolve they tend to adopt more than one software system to manage their varied transaction flows and processes. Examples include:

• Financial Reporting
• Debtors and Creditors
• Inventory
• Manufacturing Systems
• Job Costing
• Time and Billing
• Payroll
• Human Resource Systems
• Point of Sale/Cash Registers
• Debtors Ledgers
• Procurement Systems
• Sales Force Management
• eCommerce and Web Sites

There's nothing inherently wrong with multiple systems, but every so often, it's a worthwhile exercise to review these systems with a view to identifying inefficiences. It may be possible to adopt or develop middleware software that will automate the communication between disparate systems.

Examples include transferring timesheets from Job Costing or Time and Billing Systems directly into the Payroll. Or polling Point of Sale Cash Registers at regular intervals to provide turnover and profitability reports at head office.

There may come a time in the business lifecycle however when the benefits of building additional middleware outweigh the costs of migrating to comprehensive integrated Enterprise Resource Planning ("ERP") Systems.

More information: Axsapt

Who said: "There's no accounting for style?"

When it comes to Accounting for the Fashion Industry, there are very few business systems that really nail the way Business Owners and Managers deal with the unique aspects of their stock in trade.

Many systems are "bolt-on" after-market modules that merely add Colour and Size attributes to each existing inventory items. This method is only useful to retailers that sell single quantities of each garment or shoe.

However, when it comes to wholesalers that sell many quantities of each Style in various combinations of colour and size, only a Matrix type Accounting System like, Axsapt Matrix or Noble Matrix can handle rapid data entry and logical invoices and reports.

In the above image, each Style item is represented in a Matrix or Grid with the Colours along the left hand side and the Sizes along the top. With Axsapt Matrix there are up to 30 sizes and an unlimited number of colours able to be assigned to each product.

When selecting an Accounting System for the Fashion Industry, make sure that all essential sales and stock reports are also represented in the easy to read Style/Colour/Size Matrix. And if you are dealing with Electronic Data Interchange ("EDI") or Retailers that will sell your products through their Point of Sale Systems, ensure your Matrix accounting system allows you to assign a unique barcode to each combination of colour and size.

More information: Axsapt

Torturous Training

This week at Axsapt, we threw out our perfectly good SAP Business One Accounting System and replaced it with Sage Accpac ERP and Sage CRM.

We've been using SAP B1 for 4 years successfully and it was time, yet again, to put the A-Team through the torturous process of kicking over to another system.

Over many years we've used a variety of accounting systems including Attache, Arrow, Nexus, Sybiz, Advanced Business Manager, SAP and now Sage. All good systems with their specific strengths and weaknesses that are not obvious until you have used them for a while.

Our journey with Sage started just over 12 months ago, during which time we have been steadily learning this comprehensive Enterprise Resource System. Although we have learned well from the excellent training resources available, we've found that the deep knowledge that we require as Business Consultants, can only be achieved by first hand experience.

This knowledge stands us in good stead with any business wanting an appraisal of their current business systems.

More information: Axsapt

Marketing your business - What works these days?

My involvement with running a "business" goes back to 1978 when I was selling Cycling Helmets whilst studying at the University of New South Wales. I placed a small strip ad in the Student Newspaper "Tharunka" and was thrilled to see over 100 orders stuffed in my post box.

Magazine ads also served me well from 1984 when I launched a new business publishing and distributing the DeSmet C compiler for the PC and Mac. Many of my ideas for marketing during this time came from John Caples book, "Tested Advertising Methods", where I learned of the importance of measuring the results of each ad placed. My advertising budget was quite low and I found that after a number of years the return on investment of the ads was diminishing so I tried direct mail for a while with very little profit.

My first attempt at fax marketing was in 1992 when Microsoft Access 1.0 was released. The faxes were personalised and targeted at C programmers and resulted in over 150 orders. Fax marketing worked well for a few more years but then the profit return started to drop and frustration from unwanted faxes was growing.

I gave email marketing a go for a while, but never experienced the good results of the early magazine ads and personalised faxes. Since 2004 with Axsapt, our focus has changed from selling product to providing business consulting services and we tried seminars, trade shows, direct mail and telemarketing all with very limited success.

We continue to send out infrequent email newsletters primarily to keep our customers informed of important software patches and new releases. The difficulty is that everyone is swamped with "spam" and very few people have the time to read emails these days.

Until about 2006, most of our new business was sourced through leads received from our suppliers and referrals from our existing Customers, Accountants and Business Coaches. In recent years however, we've noticed a substantial drop of leads from suppliers so we experimented with a 3 month campaign with Google Adwords through Reachlocal. Although impressed with the professionalism of ReachLocal and the Adword mechanism of measuring results, we felt it didn't suit a service based business like ours.

Referrals have always impressed us as the most effective source of business primarily because of the low cost and minimal effort to progress the sale due to the "trust" factor. And so, we decided 3 years ago to try Business Network International ("BNI") to improve our referral rate. So far our experience has been quite positive in more ways than just increased sales. We've used the trusted services of fellow BNI members to improve our own business and have referred quite a bit of business to other members along the way.

This morning, I attended the BNI Conference in Townsville and the keynote speaker, Dr Ian Misner, the expert on referral marketing and BNI Founder, reminded us that building a referral network such as the BNI model takes a significant amount of effort. The secret, the "Givers Gain" philosophy, is to focus on helping other BNI members, and in time, you will receive referrals once your credibility grows. I have to agree as it took almost 2 years to receive our first sale, but now I notice we're receiving good quality, substantial leads and the future is looking very promising for our investment in BNI.

Growing any business is a rewarding journey and so far I've learned that you need to adapt to changing circumstances in order to thrive. Marketing is certainly an important aspect of most businesses and especially for service based businesses, I can highly recommend you consider BNI.

I'd be interested to learn about your experiences in growing your business. Please let me know if you agree or disagree with me. Is there another form of marketing that works for you? Click on this link to let me know.

Rick Polito

Axsapt Pty Ltd

Managing the Production of Food

Some of Axsapt's customers are well known Australian manufacturers of mass produced food products such as Cakes, Pickles and Chocolates.

What are the special needs of these sorts of industries?

• The most important from a health point of view is traceability of all products produced from a single production run or batch. If a product recall becomes necessary, it's important to identify all customers who have purchased the faulty product. This extends right down to the components used in the recipe as well.
• Raising purchase orders to suppliers to ensure that raw material components arrive just before needed so they are in peak condition. Perishability and Local availability are the key factors that determine the lead time of delivery.
• Shelf life/Use-by Dates needs to be recorded on both raw materials and the finished product. This will help the warehouse pick the oldest products first to minimise the likelihood of stocking expired products.
• Keeping stock levels at optimum levels by predicting factory production based on seasonal sales forecasts, actual orders received, current stock in the warehouse and the practical production capacity of the machinery and labour force.

Selecting a good Manufacturing System can be quite onerous as you must map the production process including all the stages of manufacture. You need to consider stock locations, outsourced manufacture, phantom bills (such as bread dough) which exists only as a temporary component in the process, resource capacity, wastage, the production of by-products etc.

More information: Axsapt

Profitably Managing your Services

If you're in the business of selling services (with or without materials) over an extended period of time, you'll be faced with the following challenges:

• estimating the job accurately based on expected costs and margins
• keeping track of your staff and sub-contractors and managing cost blow-outs
• ordering materials for direct delivery to a project
• progressive billing based on the percentage or stage of completion (work in progress)
• managing warranty retentions, including automatically invoicing retentions when they are due
• calculating the profit or loss on a job

A good Job Costing system will be seamlessly integrated into your Payroll System so that staff time booked on projects are also used to process the payroll payments. Inventory should also be linked so that estimates can be quickly prepared, accurate purchase orders raised where there is insufficient stock on hand for the job or where materials are always dropped shipped to the site.

Many businesses would benefit from a powerful Job Costing system, including Construction Companies, Airconditioning manufacturers and many Service companies (such as Software Developers).

More information: Axsapt

Cebit Sydney Surprises

Cebit this week wasn't as impressive as last year's pre-recession event. Gone were the giants of small business accounting: MYOB and Quickbooks. Other notable "no shows" were Microsoft, SAP and Sage whose stands last year probably cost as much as a small house.

Surprisingly I discovered some gems including an Australian web based fully featured Accounting and Payroll solution priced from less than $45 per month for an unlimited number of users. My first impression is this system is more capable than the hyped up Xero from New Zealand.

Another stand out was a powerful web based work flow engine from the USA for only $50 per month per user. I've seen clumsy and less capable systems for 30 times that!

Also from the USA was a powerful low cost document management system with no compromise top-level security access and a portable storage model with seamless integration into any accounting system. This is the first such system I've come across that will make document management a reality for small to medium businesses.

Over the next few weeks we'll investigate these products in detail so we can see if the "show hype" holds up and they really are of benefit to Axsapt's customers.

Explosive Accounting

With such interesting concepts as Future Income Tax Benefits, Amortisation, Consolidations, Minority Interests, Internal Rate of Return, Provisions, Contingencies, Depreciation, Revaluations, Debits, Credits, and dare I say: Double Entries, there's plenty to keep young Chartered Accountants thoroughly engaged.

And just when you thought there was no where else to go, along comes accounting for BOMs for the Australian Defence Force and other Axsapt customers.

A BOM is a Bill of Manufacturing or in the case of the Defence Department, Recipes for meals served at their Officers Mess, Sergents Mess and OR's (Other Ranks) Mess. With thousands of personnel eating in Messes every day, Axsapt's accounting systems ensure that the right number of ingredients are ordered for delivery to the kitchens.

Apart from Food, BOMs can also be used by other Manufacturers from Electronics to Shoes and Clothing. The benefits to manufacturers of using these sorts of systems is that stock holdings for components/raw materials are kept to a minimum, there is less wastage and more intelligent pricing decisions can be made because costs of finished goods are more accurate.

For more information: Axsapt

AWAs - Automation, Workflow and Alerts

One way to significantly reduce costs for SME businesses is by:

• Automating tedious processes, such as weekly, monthly, quarterly and yearly recurring sales and purchase invoices and general ledger accounting entries. Another example is automating complex payroll processing with penalties for overtime, early shift starts, meal breaks, and various allowances.
• Implementing Workflow which controls the process of completing data entry screens and documents. Workflow ensures that tasks get done in the right order and within a set time.
• Management can improve their productivity by adopting Exception Reporting or better still by being Alerted when things go wrong, such as running out of stock, a blow out of your debtors or even if an important order is not processed within their expectations.

A good referral for Axsapt for AWA is any organisation that is at risk of losing significant money if tasks are not completed correctly or within time or where there are complex and often tedious manual processes.

For more information: Axsapt

Thrive not Survive

Australia has joined the rest of the world in slipping into a deep recession. No longer can we feel complacent in riding on the back of China and India's strong demand for Australia's resources as both of these economies are now experiencing severely decreased economic growth.

The natural tendency with economic unrest is to slash costs wherever possible and this is now evident with significant increases in both local and overseas unemployment.

To assist our customers in planning to keep their businesses on track for success, Axsapt have consulted with International Business Coaches: Shirlaws, to host a practical workshop.

The content for the Thrive not Survive presentation will include:

• How to keep on track towards achieving your business growth vision through an economic down turn
• What are your growth strategies and when do you apply them?
• Exploring how to improve the efficiency of your resources to support growth
• How to understand and manage your business through its entire business life cycle; and why this is important.
• How to sustain growth in your business and discover the differences between growth in profit, margin and capacity.

The investment for this seminar is only $55 including GST which covers venue hire, drinks and canapes. I urge all Axsapt clients to take advantage of this extraordinary opportunity to improve your knowledge during these difficult times.

Click here to find out more and to register for this event

For Corporate links (general information): Axsapt and Shirlaws

Dash for Cash

Everyone in business knows that cash is king in a recession.

You'll first notice not a drop in sales but a decrease in your bank balance or increase in your overdraft. To survive you should focus on one or more of the following:

• Improve your debt collection process, ensuring it is systemised and consistently applied
• Reduce the amount of your resources consumed in servicing slow payers
• Allocate scarce inventories and services to your best customers
• Clear surplus inventories
• Extend trading arrangements with your suppliers
• Trim your expenses

The difficulty with this process is easily identifying and substantiating the potential problem areas that could be tackled. Business Intelligence (BI) Reporting, including Dashboards provide you with real time information that compare current results in the form of Key Performance Indicators. KPIs are simple metrics (such as Stock Turnover, Days to Collect Invoices, Liquidity) that you can compare against a benchmark (e.g. your own past results or an industry standard).

You should consider BI Tools that have both a financial and sales KPIs to help you identify missed opportunites to grow your business. Why? Because to Thrive in a tough market you need to grow your market share at the expense of your competitors. The best way to do that is to surround yourself with smart people and systems so you make powerful informed decisions to take your business beyond the pack.

For further information: Axsapt

Accounting for Hard Work

Accounting is hard work... ask any Accounting Undergraduate.

It takes a long time to fully grasp the principles of accounting to the extent that debits and credits make sense and transactions are correctly recorded in groupings (Revenue, Expenses, Assets, Liabilities, Equity) to produce meaningful reports to guide Business Managers.

There are many areas of accounting that rely on the judgement of the practitioner, such as revaluation and depreciation and amortisation of assets. Other examples are calculations of provisions for bad and doubtful debts and the estimation of contingent liabilities.

In my many years of business consulting, I'm surprised by how many mistakes are made in operating accounting systems and the lack of understanding of basic accounting principles. Only this month I was asked to explain why a client's accounting system produced an incorrect Business Activity Statement (BAS).

When faced with this sort of problem, I usually go back to first principles and perform a manual reworking of the computerised report to compare against. The first thing I did at this client was scan a listing of Sales for the month for unusual entries.

Near the top of the list was an $800,000 transfer from the customer's bank for the funding of a piece of equipment. This amount should've been treated as a loan but was incorrectly coded as income! A very costly error as profit and tax payable would've been overstated had the error not been detected.

The Axsapt help desk seems to be overwhelmed at times by operators confused by Bank Reconciliations. In many cases, errors made are "corrected" with entries that make the problem worse. In some cases, we recommend our customers prepare a manual bank reconciliation for comparison purposes, but very few people these days remember or have ever known how to do this?

When faced with these sorts of problems, operators should acknowledge their limitations and post unusual transactions to a Suspense account rather than often guessing incorrectly. In this way, the Company Accountant can review and advise appropriate postings rather than spending even more time and money fixing errors.

More training is also a great investment. Classroom courses will help new staff come up to speed much quicker and will help experienced users make better use of their systems. "One-on-one" training sessions are also recommended to help operators really nail complex aspects of their operations.

For more information: Axsapt

Modular Accounting Systems vs ERP Systems

Growing companies that find they are straight-jacketed by their current accounting systems, typically are faced with the difficult decision of upgrading. They can choose to implement either an all encompassing system or bolting on smaller applications to add capabilities to what they already have.

The first approach, typically an ERP (Enterprise Resource Planning) system, deals with every aspect of business: from controlling marketing campaigns and sales reps, order collection, product warehousing and distribution, payroll and HR, workflow, reporting, financials and more. ERP systems are excellent but be prepared for long and costly implementation projects.

The second method: adding functionality to a core accounting system, is usually much less stressful and costly to implement. The pitfalls may include: duplication of data (such as customer records) which may be overcome with newer systems designed with seamless links. In many cases, the modular approach ends up a better solution as the individual modules are purpose built with more capabilities than ERP systems.

Which approach is best? Firstly you must list and prioritise your requirements and note which are not adequately achieved by your current solution. The modular approach is only ever a viable option if you are relatively happy with your core accounting system and there are a range of available bolt on applications (to satisfy the missing needs) that link seamlessly with it.

In evaluating both options include all costs including additional hardware and system software costs, data conversion, configuration, testing, training and on-going support and maintenance costs.

The selection process is complex and often risky especially in recessionary times like today. You may choose to seek the advice of a Business Consultant with deep knowledge of a number of popular Modular and ERP Business Accounting Systems.

For more information, please contact: Axsapt

Servicing Equipment and Warranty Tracking

Many of Axsapt's customers are in the business of installing equipment such as air conditioners and then providing a warranty service and preventative maintenance services to ensure the equipment is operating efficiently.

You can use standard Job Costing systems to account for the initial implementation of the equipment, but typically you will need a purpose designed Service Management solution that knows about your Technicians and their skills, their availability (in terms of territory and idle time). A good Service Management system also knows about the Models of equipment you sell and service and allows you to maintain a Knowledge Base of common faults and solutions.

Other aspects to consider include automating the recurring billings, recording of equipment usage (for example, photocopiers and some coffee machines have meters that need to be polled to determine service charges).

Hand held devices are very popular with service organisations as they allow new jobs to be sent immediately and invoices to be generated on the spot. Another benefit is stock levels are more accurate as van stock allocated to the job is recorded at the time the job is done.

Another area to be aware of is that Service Management systems should be fully integrated into the base accounting system of the customer, otherwise you end up with a reconciliation nightmare where Customers, Suppliers and Inventory just don't match up over time.

For more information, please contact: Axsapt