Six Degrees Of Separation
We’ve all heard the expression: “Six degrees of separation”. On the off chance you haven’t, it refers to the belief that everyone is just 6 people away from being connected to everyone. Someone can introduce you to someone who can introduce you to someone you want to meet. And in the 1990s it was made into quite a good movie too as some of you may recall. Today, however, through the rise of social media and the internet it seems it is no longer 6 degrees, but 4 or less.
But we digress as this is not the focus of this article. Well not entirely. We do want to focus on the concept of six small degrees and the juxtaposition of how something so small can, in reality, make a massive difference. To put the concept of 6 degrees into context, look at your (analogue) watch or clock and watch how far the second-hand moves in 1 second. Or, if there are no second hands look at how small the distance is between the large hand and small hand in one minute. That distance is 6 degrees. It is not much is it? Or is it?
6 Degrees is Huge
As you have probably surmised by now, we are putting forth the notion that 6 degrees is quite big, especially when it is an ongoing proposition. Consider this. If you have two 10m ropes tied to a peg and were to stretch them out side by side separated by 6 degrees, at their ends, the ropes would be over 1 metre apart.
Now many parallels can be drawn for businesses from this. Small changes can lead to massive results, or on the reverse, small errors can compound over time and thus lead to large problems if left uncorrected. A robust financial platform such as Pegasus will help mitigate most of your potential accounting related issues as the platform is designed to tie together multiple functions and make financial oversight easier than ever. This in itself helps eradicate potential issues, but, to show you just how easily a small mistake or oversight could affect your profitability, we have compiled the following list of small issues which could have a massive effect on your agency.
Excel Sheets Are Prone to Error
Ok if this statistic doesn’t rock you to your core, we do not know what will. But as reported by Oracle, the University of Hawaii found that 90% of spreadsheets contain errors, and these errors lead to 20% of large companies suffering financial loss as a result. It may seem like a simple accounting mistake but the ramifications are huge.
The errors can be innocuous – an incorrectly placed decimal point, momentary dyslexia where someone enters 211 instead of 122 – or can be larger but still overlooked – an incorrect formula, someone using an old version of a template not a new one with updated prices, or was the case for an agency we know of, using a spreadsheet which fails to include every line item and thus produces an incorrect total. Whatever, the cause, a spreadsheet with errors will affect your business.
Not Capturing Timesheet Data
Trust us, we’ve heard a multitude of reasons for why you may not want to capture the timesheet data of your employees. But we cannot emphasise just how important this data really is. If we set aside the obvious arguments such as knowing what your staff are working on or understanding whether you are billing enough, there are a few other reasons you may want to consider, reasons which may seem innocuous, but, as with the 6 degrees example, can cause a world of difference later.
Timesheets not only allow you to see if your staff are efficient but understand if you are under or over-servicing some clients. Whilst it may seem you need to have extra hands on deck for that marquee client, have you analysed what that is doing to your profit margin? Over the course of several years, that extra person could be reducing your profits by hundreds of thousands of dollars.
If you have had any long-term projects which come off the rails, you will know fingers are pointed by everyone at everyone else. No one owns the slip. With the ability to go back and analyse timesheet data, you can see what department, or even what individuals are spending too much time on a project. This will then allow you to see if the timeline was at fault, or understand if individuals on the project are inefficient. Capturing this through a project in real-time before it goes askew will save you more than just financially.
Reflection on Estimation
A quotation or estimate contains elements of production, creative and head hours. Accurately capturing timesheet data will improve the ability to see how accurate your estimates are and allow you to understand the true head hours costs. It may reveal you are undercharging, which over the course of a year, could cost your business a pretty penny.
Reporting is Time Consuming
If you are not running a dedicated financial platform, then you will know just how involved it is developing your reports. Maybe you don’t think it takes long because sure, you have spreadsheets set up which run macros to simplify the process – and assuming these are accurate – but even then there is the process of importing the data from several sources, running the reports and then verifying them. Let’s assume that you are generating monthly reports and make some estimates on the time involved each month prior to running the reports:
- 10 minutes to see what timesheet data is missing
- 10 minutes to check all expenses are in
- 20 minutes to verify all invoices were sent
- 10 minutes the next day to follow up on the above and verify all is correct
- 30 minutes to reconcile bank transactions
- 30 minutes to enter in missing data
- 1 hour to run the reports
Total time for this is just under 3 hours a month. 2 hours 50 minutes to be exact. Over 12 months this is 34 hours or 4 days of a year. And these figures are pretty lenient really. But the biggest catch here is that the data is not live. At no point can you pull a figure within 10 minutes and have an accurate snapshot. At this juncture, you need to spend the 3 hours to get the information and then repeat at the end of the month. Pegasus on the other hand, will allow you to pull that data, in as little as a few minutes and a few clicks of your mouse. If you can win back time which can be spent elsewhere or saved in general, wouldn’t you like to? Especially when the time won can be added to reduced error rates which means less cost to the business?
We haven’t met too many clients who wouldn’t. Don’t let a little thing become the reason your agency underperforms. If you want to learn more about how Pegasus could be changing the way you run your agency and improving your Agency Financials, or even if you want a reminder on the ways you could improve your use of the system, then let’s have a chat. Get in touch with one of the Pegasus team today.