Is Anyone Watching the Door?

By Paul Starkey
Published on: June 29, 2018

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When was the last time you walked into a store, grabbed a bunch of stuff, and walked out the door without store personnel documenting what you were taking?

Aside from shoplifting, it never happens. But it happens all the time in integration companies.

Goods get taken to projects every day by installers and/or subcontractors. Instead of documenting the “takes” (and returns) on a daily basis, most companies wait until later in the project to start reconciling exactly what has been delivered and installed. The reconciliation is essentially a lengthy investigation involving multiple people over multiple hours. Often, final billing is delayed until the investigation is complete. Even then, things get missed because of flawed memories.

I liken this to a crime area without a beat cop. A crime occurs, and the detectives are called in. But if there had been a beat cop, the crime might have been prevented. Any money saved by not having a beat cop is consumed by the cost of the detective work.

The beat cop in larger integration companies is the warehouse manager. S/he “polices” the daily receipt and delivery of goods. Techs aren’t allowed to unilaterally grab items they need and leave; there is a process by which the items arriving/departing are documented. Yes, it takes a few extra minutes. But it saves hours of detective work later.

In smaller companies somebody needs to wear the warehouse manager hat. At the very least, the techs need to understand how important it is that the flow of goods is documented. Absent warehouse police, the culture should demand that they take the time to create the document on their own.

Daily tracking of the flow of goods allows companies to do two things that help manage growth and productivity:

  • Recognize revenues based on daily production (ie, invoice goods and services as they are provided to a project)
  • Maintain an inventory asset

Too many integration companies recognize revenue based on the client payment schedule. Unfortunately, this doesn’t readily match monthly revenues with monthly costs. When cash-based revenue recognition is coupled with a non-inventory bookkeeping model, the result is financial reporting that tells you nothing about the monthly productivity of your company. We see it all the time.

Your mission: start implementing the disciplines required to track revenues and costs on a daily basis. If you need help, call us.

Keep it Vital!

 

Paul Starkey

Paul Starkey

Paul Starkey is a 23 year CI industry veteran who led control manufacturer ELAN from infancy to a 150 person company. He is a visionary, keen on innovation, pioneer of on-line training, and numerous product innovations. He is co-founder of Vital Management and Executive Director of BRAVAS Group.

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