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Middle Market Waste, Inefficiency & Excess Cost

Excess cost

In today’s economy, reducing administrative overhead costs to their bare minimum can literally mean the difference between success and failure for middle market companies. In an environment when top line revenue is, at best unpredictable, it makes perfect sense to lower the break-even revenue point of the company as much as possible.  One of the easiest ways to accomplish this is to outsource payroll AND eliminate any redundant input of job cost information. It is one of my standard recommendations and I constantly hear variations on the following themes as objections to this recommendation:

  1. Payroll is just the by-product of job costing.
  2. Outsourcing my payroll wouldn’t significantly reduce my administrative burden- it doesn’t take a significant amount of time, once the job costing is done.
  3. Job costing and tying each employee’s time on various jobs out to their time card for the period takes the most time and raises the most questions.
  4. I can’t outsource the job costing.

My response to these objections usually follows along the following lines:

  1. Internal payroll processing is mundane, routine and does NOT add value to an organization- why would you expend valuable administrative resources on something that does NOT add value.
  2. Payroll companies do nothing but payroll and as a result they do it FASTER and more EFFICIENTLY and for LESS cost than anyone can do it in-house.
  3. With a minimal one-time investment in an appropriate time and attendance module (including mobile smart phone applications), the need for clerical reconciliation of job costing to employee time cards becomes a distant memory.

Depending on the manual nature of the legacy job costing/payroll process, championing process improvement like this can allow a middle market firm to reduce its administrative staffing by an entire full-time equivalent employee.  If your company struggles with profitability or is challenged with cash flow, continuing to carry excess costs and overhead burden can mean the difference between solvency and insolvency.

photo credit: Tyrants of the Sky via photopin (license)

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