You’re driving in a city. There are traffic lights, signs or all sorts. You know you have to stop when lights are red, continue when they are green. You know that if a standing sign is missing, you’ll have to look at the paintings on the ground. In contrast, if two signals contradict each other, you know which one to follow. Same if there were none, you just follow the driving regulations and in a cross. You let cars coming from the right first (unless you’re in the UK, then it’s the left).

Now imagine the same city without these signs. Accidents, traffic jams,… It’s easy to imagine the consequences, right? So we can agree that driving with no regulations can be a real chaos.

What about your company? Do you have a set of regulations, or better said, well-defined processes and policies?

Many companies lack well-defined processes or any processes at all. That and all the stress that carries tight deadlines and heavy workload, contribute to what they call out there burnt-out, suffered mainly by employees. The stress is caused sometimes by several factors besides lack of processes, policies and heavy workload. Sometimes employees are given tasks with no explanation or when they start in a new company, they don’t even have an onboarding plan. They are just thrown literally to the wilderness hoping they will survive. In the end this is what they are paid for, right?

One of my favourite words in corporate and finance jargon is intangible costs. They can be understood also as hidden-costs. These are costs that can’t be quantified and won’t be in the profit or loss statement. Lack of processes or guidelines cause much of these costs. Examples can be found in almost any situation. Let’s imagine that your business is growing, making money, which is awesome. In your team you have one person dealing with payments. She was doing great, not missing any payment and keeping everything under control, but now she has to deal with a larger number of suppliers, and the amounts to be paid are bigger. She is interacting with more departments within the company, as she needs to gather approvals from more people.

She starts asking questions, but she barely gets replies. In the end, it’s her job to book and pay invoices. She is only contacted by a colleague from Marketing or Logistics, because a supplier of theirs complained that their invoice is already overdue who is now in charge. This colleague from Marketing, Logistics or another department is unaware he had to approve an invoice. She was just told that that the Finance Department would deal with it, not that they had to press a button in the system or send an email to approve the invoice. So the only thing she does is to forward an email, confused, why the invoice was not paid. To add more fuel to the fire, that colleague chose very tight payment terms or exceeded the budget to please the supplier so that she could launch that marketing campaign ASAP, while at the same time, the colleague from logistics ordered goods without even creating a purchase order and getting it approved, promising the supplier she would get paid almost immediately.

Probably you’re getting stressed by reading this. I would. Unfortunately, this is a small example of what corporate life looks like. However, it happens in small companies too, in a minor scale, and in any type of businesses, from academies, electricians, art conservation studios, factories… Whatever business you have in mind, these issues can be applied too.

What can be done about it? “The company should hire more people”, this is what employees suffering the daily stress would answer. It could be a solution. New colleagues can be asked to deal with the situation as soon as possible. However, without sound systems in place, this situation will continue until a point of no return, when suppliers are angry enough to stop collaborating, or goods or services present quality issues, or debt is not being collected from customers in time.

When discussing the need to implement processes, or design them in a better way, the reaction is usually negative. There can be many answers, but one of the common ones is that it is useless and there is little time to do something like that. Talk to any business owner. The answer is usually “I don’t have time. I need to look for customers and not waste time in this”. Fair enough. I understand the logic behind it, failing in this can make a company lose control over their finances and end up losing more money.

What are effective processes and controls? It depends on the process itself, business area, industry, size of the company, etc. What is important is, from the very beginning, these should be made clear and be adapted over time as the company and environment change. If not, employees would use their own criteria to do what they think it’s best, which might not be aligned with what the company wants.

There can be million excuses, but even small changes which require less than a few hours, to be implemented can already help a lot. For example, in my work experience as an accountant, I have dealt with a lot of numbers, and checks, and calculations, while following accounting regulations. In the end, no matter how hard I work I end up missing things. I even make sometimes embarrassing mistakes. It’s normal. It’s part of the job and part of being human. However, I correct the way I work by including an additional check of the figures, or simply, I change the order in which I carry out my activities. In other situations, if I spot a risk, I proactively suggest a change in the process and try to implement small internal controls.

There is a big difference between companies or teams that regularly review their processes. It doesn’t have to be major changes, just gradual small changes and regularly. Over time, there can be an improvement in quality and efficiency. For that reason, implementing processes is crucial. If not, that beautiful revenue that your sales team achieved over the past months will mean nothing, if the rest of the organisation is out of control.