A simple work-in-progress – also known as a WIP – system can mean the difference between disorganised chaos and a smooth-running business. From boosting job profitability and cash flow to improving customer satisfaction, here’s four good reasons to track your work in progress from small business finance expert, Sue Hirst.
The main benefits of a good WIP system include:
Job profitability
To get a clear picture of each job’s profitability, break down a job into labour (time) and materials (baseline cost).
Understanding this basic work-in-progress data about each product or service – its timings and costs – gives you a clearer picture of their profitability. Once you know which products/services are the most profitable, you can aim to promote them over less profitable areas.
You may not be able to implement changes immediately, but it will help make future jobs more profitable.
Cash flow improvement
With no work-in-progress system in place, it’s difficult to know when to invoice. Slow invoicing equals working capital tied up – for example, in money paid to suppliers. Funds for this might come from your own pocket or an overdraft.
You need to get organised, as banks take a dim view of those asking for funds yesterday!
Good invoicing means good financial management. Here are a few invoicing tips I’ve shared in the past for small businesses.
Customer satisfaction
Naturally enough, unhappy customers are bad for business and cash flow. They delay payment and give poor references.
Service providers who arrive on time, at the right place, with the correct materials and get the job done without delay get prompt payment, as well as repeat business and referrals.
If you rely on repeat business, a WIP management system is vital. A mechanic who proactively contacts customers when it’s service time, for example, can expect a boost in income. His customer will appreciate that he helped them avoid unnecessary breakdowns.
Ease of information management
A customer is your most basic work-in-progress of all – taking them from a lead to a new customer and onwards through the funnel to becoming a repeat client or even brand advocate requires an excellent customer management system.
When customers call, how easy is it to retrieve their information? No system may mean keeping customers waiting for a call back. This is time they can call competitors, increasing your chance of losing work. Poor information management gives the impression this is how your business runs.
Information is key to a professional business. It’s less of an issue keeping it in your head when business is small, but it can cause problems when you want to grow your business. Consider, too, that a systemised business will get a better price should you ever wish to sell it.
Systemising your various works-in-progress will ultimately help you understand your business better, leading to more growth and happier customers. So, what are you waiting for?
This article was originally published in 2008 and has been updated for 2022.
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