Plug Your Profit Leaks: Ways to Significantly Save Time and Money

• Chapter 0 - Overview
  • Learning Objectives
  • Course Objectives
  • Atypical CPE
  • Workshop Roles
  • Introduction
• Chapter 1 - Step 1: Start with an Agreement on Leaking Profits
  • Learning Objectives
  • Summary—What Is a Profit Leak?
  • All Costs Are Subjective
  • Cause and Effect of Costs
  • Bad Decisions Cost You Something
  • Tool #1—Indications of the “I Don’t Care About Profit Leaks” Culture
    • Getting Agreement
    • Profit Leaks Defined
    • Importance of Internal Controls: Internal Perspective
    • How Do You Get Employees Caring about Profit Leaks?
    • What Employees Want
    • How Employees Define Profit Leaks
    • Five Inviolate Rules on the Costs of Doing Business
  • In the End
  • Questions and Application Steps
• Chapter 2 - Step 2: Create Global Awareness with a Profit Leaks Prevention Program
  • Learning Objectives
  • Summary—Start a Profit Leaks Prevention Program
  • The P and L of Business
  • How to Create Global Awareness of the Impact of Profit Leaks
  • Tool #2—Profit Leak Strategic Initiative
    • Profit Leak Prevention Defined
    • Your Global PPP Initiative
  • Tool #3—Profit Leaks Responsibility Statement
    • Ways to Make This Tool More Meaningful
    • In Essence
    • Where Profits Leaks Are Likely to Occur and Why
    • Tools Available to You
  • How to Build a Culture Where Profit Leaks Matter
    • Hallmarks of the Culture That Prevents Profit Leaks
  • In the End
  • Questions and Application Steps
• Chapter 3 - Step 3: Look for the Cause and Effect Chain
  • Learning Objectives
  • Summary—Every Result Has a Cause
  • Define What Your Customer Cares About
  • Tool #4—Customer Service Surveys
    • In Essence
  • Tool #5—Cost Drivers
    • Find the Cost Drivers
    • Regression Analysis and Cost Drivers
    • In Essence
  • Tool #6—The Truly Flexible Budget
    • Change Happens!
    • The Truly Flexible Budget
    • In Essence
  • Tool #7—The Rolling Forecast
    • Rolling Forecasts
    • In Essence
  • In the End
  • Questions and Application Steps
• Chapter 4 - Step 4: Look for Culture-Caused Profit Leaks
  • Learning Objectives
  • Summary—It’s the Culture!
  • Culture vs. Profit War!
  • The Story You Tell
  • Cultural Aspects of Profit Leak Prevention
  • Culture-Caused Profit Leak: The Lack of Feedback
    • Feedback Loop Defined
    • Your Feedback Looping
    • What Feedback Is and Is Not
  • Tool #8—Profit Leaks Feedback Loop
    • Turning Goals into Reality Process
    • Feedback Looping—Involving the Front Line
    • Feedback Looping—Involving the Plan
    • Feedback for Productivity—Saving Time
    • Feedback as Driver of Performance Excellence
    • In Essence
  • Culture Caused Profit Leak: A High Cost Mission
  • Tool #9—Mission-Based Budget
    • Operating Costs and Mission Connection
    • Step 1
    • Step 2
    • Step 3
    • Step 4
    • In Essence
  • Culture Caused Profit Leak: Employee Turnover
    • Cost of Employee Turnover
    • In Essence
  • Culture-Caused Profit Leak: Peanut Butter Budget Cuts
    • Measure the Impact of Cost Cutting
  • Tool #10—Budget Revision Worksheets
    • Budget Revision Worksheet Part 1
    • Budget Revision Worksheet Part 2
    • Budget Revision Worksheet Part 3
  • Culture-Caused Profit Leak: Lack of Objective Targets
  • Tool #11—Benchmarked Targets
    • Know If You Are Making Progress
    • In Essence
  • In the End
  • Questions and Application Steps
• Chapter 5 - Step 5: Look for Decision-Caused Profit Leaks
  • Learning Objectives
  • Summary—Sustainable Profits and Accountability Require Smart Decisions
  • What Is Important
  • Understanding Process Management
  • Decision Caused Profit Leak: Bad Decisions
    • Bad Decision-Making
  • Tool #12—Proper Cost Analysis
    • Performing Cost Analysis
    • Cost Analysis Defined
    • Common Cost Analysis
    • How to Perform a Proper Cost Analysis
    • What Do You Aim For?
    • Which Tools Do You Use?
    • Overall Process for Performing Financial Analysis
    • In Essence
  • Decision-Caused Profit Leak: Not Maintaining a Vigilant Financial Awareness
  • Tool #13—Trend Spotting with Ratio Metrics
    • Lack of Ratio Analysis
    • A Complex Ratio
    • In Essence
  • Decision Caused Profit Leak: Failure to Recognize the Bottom-line Impact
    • Analyze the Bottom-line Impact
  • Tool #14—Mind Mapping the Bottom-line Impact
    • Mind Map the Connections
    • In Essence
  • Decision Caused Profit Leak: Invalid Cost Assumptions
    • Make Sure Your Cost Assumptions Are Valid
  • Tool #15—Testing Your Cost Assumptions
  • Decision-Caused Profit Leak: Focusing on Costs Instead of Resources
  • Tool #16—Activity-Based Budgeting
    • Activity-Based Budgeting
    • Why Overhead Grows Unchecked
    • More on Activity-Based Costing
  • In the End
  • Questions and Application Steps
• Chapter 6 - Step 6: Look for Process-Caused Profit Leaks
  • Learning Objectives
  • Summary—It Is the Process, Silly!
  • Process Caused Profit Leak: Bad Processes
    • Employ the Power of the Process
  • Tool #17—Process Mapping for Effectiveness
    • Connect the Dots about the Process
    • Process Evaluation
    • In Essence
  • Process Caused Profit Leak: Beating a Dead Horse
  • Tool #18—Process Half Life
    • Clean Up Your Process
    • In Essence
  • Process Caused Profit Leak: Actions without Value
    • Remove Costs That Do Not Benefit Anyone
  • Tool #19—Value Chain Analysis
    • The External Value Chain Map
    • The Inside Out Value Chain Map
    • How to Use This Tool
    • Efforts to Instill Value into Activities
    • Value Chain Analysis in Accounting
    • In Essence
  • Process Caused Profit Leak: Processes without Value
    • Processes without Value
  • Tool #20—Process Value Added Test
    • Ensure Your People Are Adding Value
    • In Essence
  • Process-Caused Profit Leak: Doing More Work than Necessary
    • Employ the Power of 80/20
    • Using 80/20 in Profit Leak Detection
  • Tool #21—The Rule of 80/20
    • Practical Applications of the Rule of 80/20
    • The Rule of 80/20 Leads to a New Business Model
    • In Essence
  • Process-Caused Profit Leak: Status Quo
    • Employ Continuous Improvement in Everything
  • Tool #22—Continuous Improvement
    • The Steps of Continuous Improvement
    • Employ Continuous Improvement in Everyone
    • In Essence
    • Areas to Focus On during Process Improvement Projects
  • In the End
  • Questions and Application Steps
• Chapter 7 - Step 7: Look for People-Caused Profit Leaks
  • Learning Objectives
  • Summary—Get the Mule’s Attention
  • Your OPM Problem
  • Symptoms of Your OPM Problem in Your Budget or Resources Allocation Process
  • Solutions to Your OPM Problem
  • People Caused Profit Leak: Taking the Path of Least Resistance
    • Profit Leaks and Path of Least Resistance
  • Tool #23—Changing the Path of Least Resistance
    • Strategies to Alter the Existing Path of Least Resistance
    • In Essence
  • People Caused Profit Leak: Lack of Clear Authority
    • Assign Specific Responsibilities with Accountability
    • Empowerment in Action
  • Tool #24—Responsibility Charts
    • Perform an Authority and Responsibility Analysis
    • In Essence
  • People-Caused Profit Leak: Lack of Performance Standards
  • Tool #25—Performance Measuring
    • Importance of Employee Performance Metrics
    • Goals of Applying Metrics to Employee Performance
    • Raising the Performance Bar
    • Internal Productivity Metrics
    • In Essence
  • People Caused Profit Leak: Misaligned Rewards
    • Profit Leaks Arise Again and Again
  • Tool #26—Rewards and Recognition
    • Use Rewards and Recognition to Enhance Profits
    • Inspire Employees to Find Profit Leaks with Rewards and Recognition
    • Downside of Rewards
    • Cultural Implications of Rewards
    • In Essence
  • People Caused Profit Leak: Lack of Consensus on Assumptions
  • Tool #27—Determining Assumptions Up Front
    • Assumptions
    • Common Assumptions Impacting Your Bottom-Line
    • In Essence
  • People Caused Profit Leak: Lack of Solution Creation Tools
    • Strategies Leading to Action Steps
  • Tool #28—The How-How Diagram
    • The How-How Defined
    • Using the Tool
    • In Essence
  • People Caused Profit Leak: Short Memories
  • Tool #29—Story Telling
    • Use Stories to Save Money or Time
    • In Essence
  • People Caused Profit Leak: Lack of Learning
    • Collect the Ideas that Prevent Profit Leaks
  • Tool #30—Best Practices and Lessons Learned Sharing
    • The Tool for Fostering a Lessons Learned Attitude
    • In Essence
  • In the End
  • Questions and Application Steps
• Chapter 8 - Step 8: Help Others to Connect the Dots
  • Learning Objectives
  • Summary—Connecting the Dots
  • Shake Things Up
  • Tool #31—Transforming to a Culture of Planning
    • Game Plan to Transform to a Culture of Planning
    • In Essence
  • In the End
  • Questions and Application Steps
• Chapter 9 - Step 8½: Start Now and Start Any Place
  • Learning Objectives
  • Summary—Starting Point
  • LP3 FAQs
  • Entry Point 1: Learn from Each Other
  • Tool #32—The Plus/Delta
    • Steps of the Plus/Delta
    • Entry Point 2: Commit to Action
  • Tool #33—Personal Commitment
    • The Personal Commitment
    • Entry Point 3: Checklist
  • Tool #33½—Checklist of 21½ Specific Ways to Save Time and Money
    • Never Stop
  • In the End
  • Questions and Application Steps
• Chapter 10 - Latest Developments
• Appendix A - Your Firm’s Profit Leaks Workbook
  • Instructions
  • Profit Leaking Humor
  • Step 1: Start with an Agreement on Leaking Profits
    • Tool #1—Indications of the “I Don’t Care About Profit Leaks” Culture
  • Step 2: Create a Global Awareness with a Profits Leaks Prevention Program
    • Tool #2—Profit Leak Strategic Initiative
    • Tool #3—Profit Leaks Responsibility Statement
  • Step 3: Look for the Cause and Effect Chain
    • Tool #4—Customer Service Surveys
    • Tool #5—Cost Drivers
    • Tool #6—The Truly Flexible Budget
    • Tool #7—The Rolling Forecast
  • Step 4: Look for Culture Caused Profit Leaks
    • Tool #8—Profit Leaks Feedback Loop
    • Tool #9—The Mission-Based Budget
    • Tool #10—Budget Revision Worksheets
    • Tool #11—Benchmarked Targets
  • Step 5: Look for Decision-Caused Profits Leaks
    • Tool #12—Proper Cost Analysis
    • Tool #13—Trend Spotting with Ratio Metrics
    • Tool #14—Mind Mapping the Bottom-line Impact
    • Tool #15—Testing Your Cost Assumptions
    • Tool #16—Activity-Based Budgeting
  • Step 6: Look for Process-Caused Profits Leaks
    • Tool #17—Process Mapping for Effectiveness
    • Tool #18—Process Half Life
    • Tool #19—Value Chain Analysis: Customer Orientation
    • Tool #20—Process Value Added Test
    • Tool #21—The Rule of 80/20
    • Tool #22—Continuous Improvement
  • Step 7: Look for People-Caused Profits Leaks
    • Tool #23—Changing the Path of Least Resistance
    • Tool #24—Responsibility Charts
    • Tool #25—Performance Measuring
    • Tool #26—Rewards and Recognition
    • Tool #27—Determining Assumptions Up Front
    • Tool #28—The How-How Diagram
    • Tool #29—Story Telling
    • Tool #30—Best Practices and Lessons Learned Sharing
  • Step 8: Help Others Connect the Dots
    • Tool #31—Transforming to a Culture of Planning
  • Step 8½: Start Now and Start Any Place
    • Tool #33½—Checklist of 21½ Specific Ways to Save Time and Money

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Chapter 0 - Overview

Welcome to a course on how to become more profitable!

Learning Objectives

This workshop is designed to give you specific ways to create a positive impact on your firm’s bottom-line. The focus is on permanent, long-term solutions embedded in your cultural ideals instead of the common short-term fix of cost-cutting and layoffs. This proven strategy will pay off in lowering your costs, improving productivity, and gaining efficiencies. You will leave with a keen understanding of how to reverse the unwise decisions and weak processes that lead to significant profit leaks.

We accountants spend a majority of our time dealing with the cost side of the business. There are many techniques to reduce this time while producing better, more accurate results. This innovative workshop provides you with the opportunity to design a more effective cost management process.

Course Objectives

As a result of participating in this workshop, you will

• Develop a clear understanding of the organization’s strategy and how it drives costs.

• Learn how to improve your internal processes for maximum effectiveness.

• Define what is most important and use that to create leadership leverage.

• Identify costs that do not benefit the customer and permanently remove them.

• Understand how to create a company-wide awareness about the impact of costs.

• Use stories that will foster economy and productivity.

• Identify potential profit leaks and where to concentrate for the best results.

• Acquire specific tools that detect, prevent, and fix profit leaks.

• Foster solutions for your profit issues.

What Is In This Session For You?

By participating and committing to use the tools, you will leave with a variety of ways to make your firm more profitable and employees more productive. In other words, you will be able to save both time and money—items in limited supply these days. Even better, you will be seen as the company hero!

Atypical CPE

This course will be very different from the type of CPE you are used to taking. It is not a lecture session—it is an opportunity for application. The primary focus of this workshop will be in four areas:

1. Understanding what a profit leak is.

2. Connecting the dots for others so they can also spot profit leaks.

3. Adding 34 practical tools to your toolkit, which will enable you to eradicate profit leaks permanently.

4. Focusing on how you can be the agent of change and get others to care about profit leaks so it becomes a cultural norm.

This is both a technical and leadership course.

The technical element comes from the tools and applying them. The leadership element is inherent in the necessity for someone (you) to lead this effort. To be a High Road™ Leader, you need to become an agent for positive change. Implementing a Profit Leaks Prevention Program will demonstrate that you are a High Road Leader.

This format will definitely be challenging to you and your peers. However, by the end of this workshop, you will have significantly enhanced your ability to spot and eradicate profit leaks. The final step will be up to you. In order to retain this knowledge so that you can apply it in your firm, you will need to get started right away creating the momentum for the entire organization.

Workshop Roles

• Discussion Leader—To disseminate and explain the strategy, tools, and ideas.

• Participants (you)—To contribute ideas, learn, discuss, and apply the information.

Thank you for being present today!

Notes:

Raelco is fictional and a composite of real organizations.

High Road and Plug Your Profit Leaks are registered trademarks of Ron Rael.

Introduction

Profit Leak Prevention requires you to connect the dots for others!

All too many business executives believe there are only two ways to boost profits: increase revenues or drastically cut costs.

That is only half correct!

Every company and every organization has profit leaks. All these leakages of your profits go undetected!

Why? Because employees, managers, and executives do not know they exist. These profit leaks stay in the background, and everyone believes that they are a normal part of business. In this innovative course I will give you specific areas where these profit leaks exist and the tools to prevent them. This course is basically a strategy to help you save time and money, both of which benefit the bottom-line, whatever you define that to be.

Warning! You cannot apply this strategy alone. You must enlist the assistance of every employee in your company to seek out and destroy (remove) profit leaks!

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