Yields analyses, portion control, wastage & returns
This podcast looks at these basic worksheets from multiple perspectives, to reveal how most businesses could save significant amounts with modest effort. But we also look at how employees are inadvertently given free reign to manipulate your bottom line.
First, let’s start with the systems that help you monitor and, subsequently, control financial outflows and shrinkage. Mostly, these are unpretentious spreadsheets, used every day.
Surveys reveal that over 70% of small businesses and sole proprietorships use spreadsheet software like Excel, Google Sheets and Apple Numbers to do their regular accounting. Excel absolutely dominates this field.
In a prior podcast, I explained why your business should consider moving to such accounting software as Intuit or Sage for regular bookkeeping, but Excel spreadsheets still serve a very useful purpose in your day-to-day operations.
Job costing, print versions of fillable forms and so on are easiest on spreadsheet software, but even those are readily manipulated, either accidentally or intentionally, by employees.
One of the riskiest practices that businesses expose themselves to is the failure to use lockable cells, formulas, columns and rows to protect data from being manipulated.
Excel, in particular, offers easy-to-use tools to protect data from being seen and from being altered.
While technology has made life simpler for business, it also has opened up the door to much greater capacity for embezzlement, fraud and theft. No greater opportunity exists for the layman embezzler than “cooking” the books. The ways that this occurs are myriad.
However, I want to focus on simple recordkeeping in the micro-business world.
There are four basic spreadsheets and logs that the majority of businesses, from restaurants and hospitality to trades and manufacturing can use, in varied formats, to control their finances: yields analyses, portion control, wastage and refund/return logs.
There are many other spreadsheets that improve your control over finances, and almost all can be integrated and coordinated so that you enter simple data once and that data populates every relevant cell and spreadsheet. Calculations and analysis generally result automatically. But the reverse is true, if an employee enters the wrong or fraudulent data, and this is the reason why you require safeguards on the entries.
But Excel allows you to lock individual cells, formulas, columns or rows using a password to which only you have access. That allows the employee to enter general data in other cells, while the hidden and locked cells calculate automatically. The reverse also works: Employees can enter data that is affected by the locked cells.
You can even hide the linking sheets or columns so that the employee may not even realize that there is background information at work.
These cells can be used, as well, as “flags,” alerting you discretely if there are abnormalities or unusual entries in the worksheets.
You may even link another file (not just spreadsheet) to the primary file, so that only you can access that data.
The idea behind locking or hiding information is not just so you can protect against accidental data entry error. It is so you can set these worksheets to notify you when costs increase unexpectedly, sales drop, demand changes, or when trends develop. Theft and fraud detection is just a part of the benefit of having secure data that can automatically be analysed, freeing you from the task of manually reviewing every transaction.
The setup of each of these worksheets likely is beyond the skillset of many of your staff, or even yourself, but once they are established, they are virtually maintenance-free. Using “If” scenarios is the most prevalent way to establish the trigger points that alert you to emerging problems and once you have done a handful of these, the methodology is simple.
So we have explained the best reasons to use spreadsheet locking mechanisms, both from efficiency and profitability standpoints and from theft and fraud standpoints.
Now, how do we use these four forms across the varied range of business types?
Let’s start with a yields analysis.
A yields analysis looks at all the inputs for a product (or service) and determines if you are getting the best production for those inputs. Usually, people associate yields analyses with meals at a restaurant, but farmers measure all the inputs, from seed to fuel to fertilizer to determine if the crop is viable, given the price received. Restaurants are able to adjust their prices upward to compensate for increased input costs, while farmers must either hold onto their crops or plant alternative crops that give s better yield and profit.
Even fabrication shops use yields analyses to determine whether to source different input materials and supplies from other suppliers. For example, a manufacturer of aluminum home products like awnings, doors, etc. may reroute supply lines away from countries with high tariffs.
Of course, home builders also must consider input units and outputs to determine optimum production and yields.
Each of these also employ other controls, like portion control and wastage evaluations.
Yields analyses are one of the most effective measurements to uncover theft, fraud and embezzlement at the hands of suppliers or staff.
Portion Control
Portion control often goes hand-in-hand with yields, but, for restaurants, portion control also is a quality control method to ensure uniformity.
In farming, equipment may be adjusted to reduce or increase fertilizer per hectare or seed quantity.
Manufacturers may opt for a lower quality input portion of less stressed components to reduce costs.
Portion control will reveal whether staff are overusing items, rerouting for personal gain or omitting fraudulent acts. It also shows where suppliers may be providing less than optimum size or quantity of goods in bulk purchases.
Wastage
Wastage records allow you to see where production is failing, where quality control needs to be improved and where preparation methods are lax. But it also tells you if staff are “creating” wastage for their own gain.
Returns & Refunds
Lastly, refunds, returns and repair logs show where specific products are failing. It can be meals returned, a component of a product that does not meet standards, a specific product returned because it does not do the job for which it was purchased or something as seemingly benign as uncompetitive pricing.
But refunds and returns are common sources of employee fraud, theft and collusion.
These four tools are just a few of the many simple records that should be used and adapted specifically to your business, in order to maximize profits, retain quality control and deter deviance.
With software that can be purchased annually for as little as $150 per year, the use of spreadsheets to protect against all forms of loss will pay for itself many times over, in any business.
Western Canada Profit Recovery Centre regularly adapts and creates customized forms for your business, online or in person, for less than two days salary of the average employee, yet recovers loss or prevents the same many times over that value.
Visit www.profitrecoverycentre.com for more ideas.
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