Author : K Allen
There are many reasons healthcare practices might outsource their billing to a professional medical billing service; confusing insurance requirements, staffing problems and just keeping up with industry changes are a few examples. In the end though, the reasons most medical billing companies hear about come down to the two driving principles of any business – Time and Money. This article discusses how medical billing services are able to create significant savings in time and money for healthcare providers.Medical Billing Services Save Training and Research Time
- Some readers might take the short view and think medical billing companies just enter data into a computer and send it off to a clearinghouse. In reality medical billing is a detailed process requiring specialized skills and in-depth knowledge of medical practice management, insurance industry practices, and the regulatory framework around state and federal laws. Professional medical billing companies invest countless hours in training and research to keep abreast of current codes, submission requirements, industry trends and the needs of their clients.Significant expenditures are also made to ensure medical billing companies are up to date on the latest software. In a constantly changing industry, software vendors are always finding new and better ways of supporting practice needs. It's not practicable for small or medium sized practices to dedicate the time necessary to stay on top of the latest innovations.These investments of time by professional medical billing services are often not considered by providers, but they eliminate endless hours otherwise spent in seminars, meetings with vendors, or on the phone with clearinghouses and carriers. This time savings creates a valuable commodity for a practice seeking the edge necessary to keep up with a rigorous patient schedule.Medical Billing Services Save Operational Time
-Medical billing services are able to save operational time by leveraging the economy of scale and the efficiency of task specialization.Professional medical billing companies, by their very nature, create an economy of scale in maintaining a team of medical billing professionals to provide services across several practices. This structure creates a well trained pool of resources to manage each practice's needs rather than just one individual overseeing all billing functions. The team approach also removes interruptions to revenue flow that result from vacations, unexpected sick time and staff turnover.Task specialization among teams further heightens the efficiency of medical billing companies. Through task specialization, a team of billers can accentuates individual skills and reduces distractions of other activities.Consider a provider who sees an average of 30 patients per day, or a total of 150 encounters per week. The time required to generate and submit 150 patient claims and follow up with insurance carriers with a high lever of accuracy can take up most of the time of an in-house biller. But this is just the beginning. That same individual will also need to follow up on denied or partially paid claims, researching why and resubmitting for further review. Patient invoices require additional time- printing, stuffing and mailing- as well as posting payments, running reports and providing detailed analysis on the current state of the practice; all this just to meet the standard offering of professional medical billing companies.Through task specialization, medical billing companies might offer each of its clients several billers submitting claims and reviewing insurance payments with the highest level of accuracy. At the same time, the service might have other individuals or groups dedicated to managing patient invoices and questions across several practices with increased efficiency. This approach maximizes the time available for each activity by specialists with a greater knowledge of their roles, and, again, guarantees minimal (if any) interruption during employee leave and staff changes.Medical Billing Services Save Money
-Hiring and training new staff, employee benefits, vacation/sick leave, and staff turnover are just a few factors increasing the costs of managing an efficient in-house billing program. Added to the operational overhead of day to day billing, software/hardware maintenance, clearinghouse fees, postage, and so on, the list of expenditures for practices is endless.Good medical billing companies will design their services around covering all of these costs and immediately do away with the problems they create. To clearly demonstrate how medical billing services can save practices money, let's compare the core costs associated with in-house medical billing against working with a professional medical billing service.Cost of In-House Billing:
Our comparison begins with a typical practice with one or two providers. Let's assume this practice has a dedicated, in-house biller receiving an annual salary of $30,000, or about $14.50 per hour. The chart below outlines the additional costs of having a full time employee in the office to handle all aspects of medical billing.
Base Pay --------------------------$30,000
Medicare and Social Security ---------$2295
401K --------------------------------$1080
Disability -----------------------------$720
Healthcare --------------------------$5220
Time off -----------------------------$3270
Total labor for 1 in-house biller ------$42,585
Next, we'll need to consider materials and fees. An average practice will probably upgrade computers and software every 3 years at a cost of about $6,000. Spread out over those three years, we'll assume an average annual software/hardware expenditure of $2000. Since our practice will send out its own patient statements, we'll need about $150 per month for postage, paper and envelopes, an annual cost of $1800. Clearinghouse fees for electronic claims will come to about $60 a month, or around $720 annually. For the sake of simplicity, we'll forget for the moment that our biller will need a climate controlled workspace, lights, general office supplies and a desk.Here's what our list of software/hardware, materials and fees looks like:
Software/Hardware -----------------$2000
Materials ---------------------------$1800
Clearinghouse Fees ------------------$720
Total ------------------------------$4520
Adding the two totals above (labor + materials & fees), the annual cost of medical billing services performed in-house by the practice comes to $47,105 per year. Of course this number might not mean much until we put it in perspective against teaming with a professional medical billing service. As we move forward, keep in mind this conservative estimate does not factor in those other costs mentioned above that are often hidden - ongoing training, unexpected leave and sudden staff changes.Cost of Professional Medical Billing Services:
To evaluate the cost of working with medical billing services, we'll assume our practice has contracted with a medical billing company for full service billing. This includes all of those activities that would otherwise have been performed by the in-house staff above; claim generation/submission, insurance follow up, patient invoicing and support, detailed reporting, expert practice analysis, etc. We'll also assume the practice has negotiated a rate of 8% of collections with its professional medical billing service.Note: Calculating costs for medical billing services will vary slightly depending on the fee structure but will usually be based on either a percentage of collections or a fixed fee per claim. For more information on fee structures, see Percentage vs. Flat Fee Pricing by Medical Billing Services.Assuming our provider visits 30 patients per day, 50 weeks out of the year, we'll have 7500 patient encounters per year. If each encounter results in an average reimbursement of $60, our receivables come to a little over $450,000 per year. At a rate of 8%, the annual cost for the professional service to manage all aspects of medical billing services for the practice would be $31,500. In comparison with in-house services that's a savings of $15,600 per year! Summary
In evaluating the benefits of outsourcing to a professional medical billing company practices should consider the overall savings in time and money, beyond just minimizing the hassles. Medical billing companies provide knowledge, training, continuity of operations and a network of support leveraging task specialization and the economy of scale. Medical billing companies are able to eliminate dependency on one or two costly staff members to maintain revenue flow for the entire practice.For more information on the benefits of outsourcing, contact Diversity Medical Billing Services. Leverage maximum efficiency and economy through a well designed support structure and industry leading rates. Diversity's medical billing services ensure the stability of practice cash flow while attaining the highest reimbursements possible. You can also learn about other ways to improve your billing with in-depth Medical Billing Articles and Information.
Keyword : medical billing services save time and money, medical billing outsourcing, medical billing services
วันเสาร์ที่ 23 กุมภาพันธ์ พ.ศ. 2551
Conflict Resolution - Managing Workplace Conflict
Author : Kelly Graves
It goes by many names -- conflict prevention, conflict resolution, conflict management, the names go on. These terms were all created to combat a similar problem. For the most part, people who deal with these issues all agree with the same principle:Conflict resolution at an early stage is less costly and more manageable than trying to deal with its repercussions later.First, let's discuss the types of conflicts we have observed in our years of experience working with organizations.We have observed 3 major types of workplace conflict:Task Conflict
Task conflict arises among members of work teams and specifically affects the goals and tasks they are striving to achieve. Differences in vision, intentions and quality expectations often lead to task conflict. Employee relationships may initially appear to survive task conflict but an important project may not. It is essential to channel task conflict so that these differences become collaborative and improve the way the team thinks about accomplishing current and future tasks.Process Conflict
This form of conflict centers around the steps or methods used by a team to reach a goal. One person might like to plan 100 steps ahead while another might like to dive in head first. These differences in process can lead to communication breakdown and ultimately conflict. But, like task conflict, process conflict can be useful, if managed correctly. Healthy differences in process often will lead to an IMPROVED way of achieving goals.Relationship Conflict
Often misunderstood, relationship conflict undermines and tears at the fabric of a team's ability to achieve goals effectively, efficiently and profitably. Relationship conflict penetrates all aspects of an organization. When people in a workplace fail to communicate effectively, entire work teams or even an entire organization will suffer. This type of conflict will quickly consume all the attention and energy of an organization, leaving little time to accomplish profitable tasks.What can you do to bring conflict to a reasonable resolution? And how can it be beneficial to everyone involved? The goal is to increase the benefits achieved from encouraging task and process conflict while at the same time reducing, managing and understanding the negative effects of relationship conflict.The benefits of effective conflict resolution are great:
Improve organizational decision making
Inspire employees to articulate and clarify their ideas and positions
Stimulate innovation, creativity and forward thinking
Improve individual and group performance
If no resolution is sought for conflict the affects are often devastating:
Job stress and burnout rises which typically increases absenteeism and turnover
Distrust and suspicion develops often creating an "us versus them" culture
Job satisfaction and performance falters
Employee loyalty and commitment declinesABOUT THE AUTHOR
Kelly Graves is the founder and CEO of Internal Solutions Consulting. ISC specializes in organizational conflict resolution. With over 85 years of combined experience in organizational conflict resolution, Internal Solutions is able to quickly address conflicts within an organization to facilitate a more successful, productive and profitable communication environment. For more informaiton about Internal Solutions Consulting please visit http://www.conflictresolutionusa.comARTICLE REPRODUCTION
We encourage people to reproduce this article for their own needs. The article must be reproduced in ITS ENTIRITY. Please include the 'ABOUT THE AUTHOR' section with all author credits, hyperlinks and names. Also please include this section regarding article reproduction.
Keyword : conflict resolution, workplace conflict, conflict resolution activities, conflict resolution tips
It goes by many names -- conflict prevention, conflict resolution, conflict management, the names go on. These terms were all created to combat a similar problem. For the most part, people who deal with these issues all agree with the same principle:Conflict resolution at an early stage is less costly and more manageable than trying to deal with its repercussions later.First, let's discuss the types of conflicts we have observed in our years of experience working with organizations.We have observed 3 major types of workplace conflict:Task Conflict
Task conflict arises among members of work teams and specifically affects the goals and tasks they are striving to achieve. Differences in vision, intentions and quality expectations often lead to task conflict. Employee relationships may initially appear to survive task conflict but an important project may not. It is essential to channel task conflict so that these differences become collaborative and improve the way the team thinks about accomplishing current and future tasks.Process Conflict
This form of conflict centers around the steps or methods used by a team to reach a goal. One person might like to plan 100 steps ahead while another might like to dive in head first. These differences in process can lead to communication breakdown and ultimately conflict. But, like task conflict, process conflict can be useful, if managed correctly. Healthy differences in process often will lead to an IMPROVED way of achieving goals.Relationship Conflict
Often misunderstood, relationship conflict undermines and tears at the fabric of a team's ability to achieve goals effectively, efficiently and profitably. Relationship conflict penetrates all aspects of an organization. When people in a workplace fail to communicate effectively, entire work teams or even an entire organization will suffer. This type of conflict will quickly consume all the attention and energy of an organization, leaving little time to accomplish profitable tasks.What can you do to bring conflict to a reasonable resolution? And how can it be beneficial to everyone involved? The goal is to increase the benefits achieved from encouraging task and process conflict while at the same time reducing, managing and understanding the negative effects of relationship conflict.The benefits of effective conflict resolution are great:
Improve organizational decision making
Inspire employees to articulate and clarify their ideas and positions
Stimulate innovation, creativity and forward thinking
Improve individual and group performance
If no resolution is sought for conflict the affects are often devastating:
Job stress and burnout rises which typically increases absenteeism and turnover
Distrust and suspicion develops often creating an "us versus them" culture
Job satisfaction and performance falters
Employee loyalty and commitment declinesABOUT THE AUTHOR
Kelly Graves is the founder and CEO of Internal Solutions Consulting. ISC specializes in organizational conflict resolution. With over 85 years of combined experience in organizational conflict resolution, Internal Solutions is able to quickly address conflicts within an organization to facilitate a more successful, productive and profitable communication environment. For more informaiton about Internal Solutions Consulting please visit http://www.conflictresolutionusa.comARTICLE REPRODUCTION
We encourage people to reproduce this article for their own needs. The article must be reproduced in ITS ENTIRITY. Please include the 'ABOUT THE AUTHOR' section with all author credits, hyperlinks and names. Also please include this section regarding article reproduction.
Keyword : conflict resolution, workplace conflict, conflict resolution activities, conflict resolution tips
Tips for Performance Reviews
Author : Scott Morris
If you employ people in your business, you're going to be faced with a number of tricky management issues - dealing with tardiness, sick leave, and keeping your staff motivated.Performance reviews can be useful for motivating employees, but only if they are accurate. An inaccurate review, which fails to recognize the employee's value to the organization, can be worse than no review at all.If a performance review fails to take note of an employee's shortcomings, it won't be taken seriously.If an employee consistently performs poorly, it's vital to document this, as well as any corrective action that is taken.Your staff may be genuinely unaware that their performance in some areas is poor (or exceptional!), unless you tell them.Most employers conduct performance reviews annually, in order to decide on salary increases and bonuses. Since performance reviews should build on previous reviews, it's better to conduct them more regularly - every 4 months is a good frequency.Employees thrive on feedback, and regular performance reviews provide a consistent framework for providing positive reinforcement.Under-performing employees can also benefit. Regular reviews can identify weak performance areas, and allow you to set clear goals and expectations, and to coach and mentor the employee to improve their performance.Objectivity is vital. You need to concentrate on measuring performance, and not on quirks of personality.The performance review should relate directly to the employee's job profile - your employees do have job profiles, or job descriptions, don't they? The job profile should identify the Key Performance Areas for the job. For instance, some Key Performance Areas for a receptionist might be:* answer incoming calls within 3 rings
* take messages accurately and pass them on quickly
* type at a rate of 25 words a minuteThe more measurable a Key Performance Area, the better.Some other measurable Key Performance Areas include:* number of sick days
* number of absent days
* number of instances of tardiness
* number of customer complaints
* number of customer compliments
* number of co-worker complaintsOf course, you would have to keep accurate records of all of these, in the employee's personal file.You should prepare a performance review form for each employee, which lists the Key Performance Areas for the job, and provides a matrix for you to record the performance in each area.For example, you might rate the employee's performance in each Key Performance Area against a scale of
'Poor, Satisfactory, Good, Very Good, Excellent'Performance reviews should be a collaborative process - as far as possible, the employee should agree with your assessment.Scott Morris manages the site on performance management course.
Keyword : enterprise performance management,performance management course,performance management consultant
If you employ people in your business, you're going to be faced with a number of tricky management issues - dealing with tardiness, sick leave, and keeping your staff motivated.Performance reviews can be useful for motivating employees, but only if they are accurate. An inaccurate review, which fails to recognize the employee's value to the organization, can be worse than no review at all.If a performance review fails to take note of an employee's shortcomings, it won't be taken seriously.If an employee consistently performs poorly, it's vital to document this, as well as any corrective action that is taken.Your staff may be genuinely unaware that their performance in some areas is poor (or exceptional!), unless you tell them.Most employers conduct performance reviews annually, in order to decide on salary increases and bonuses. Since performance reviews should build on previous reviews, it's better to conduct them more regularly - every 4 months is a good frequency.Employees thrive on feedback, and regular performance reviews provide a consistent framework for providing positive reinforcement.Under-performing employees can also benefit. Regular reviews can identify weak performance areas, and allow you to set clear goals and expectations, and to coach and mentor the employee to improve their performance.Objectivity is vital. You need to concentrate on measuring performance, and not on quirks of personality.The performance review should relate directly to the employee's job profile - your employees do have job profiles, or job descriptions, don't they? The job profile should identify the Key Performance Areas for the job. For instance, some Key Performance Areas for a receptionist might be:* answer incoming calls within 3 rings
* take messages accurately and pass them on quickly
* type at a rate of 25 words a minuteThe more measurable a Key Performance Area, the better.Some other measurable Key Performance Areas include:* number of sick days
* number of absent days
* number of instances of tardiness
* number of customer complaints
* number of customer compliments
* number of co-worker complaintsOf course, you would have to keep accurate records of all of these, in the employee's personal file.You should prepare a performance review form for each employee, which lists the Key Performance Areas for the job, and provides a matrix for you to record the performance in each area.For example, you might rate the employee's performance in each Key Performance Area against a scale of
'Poor, Satisfactory, Good, Very Good, Excellent'Performance reviews should be a collaborative process - as far as possible, the employee should agree with your assessment.Scott Morris manages the site on performance management course.
Keyword : enterprise performance management,performance management course,performance management consultant
Margin Management - Using the Supplier Profitability Ratio to Hold Your Vendors Accountable
Author : Rick Johnson
Margin management is not rocket science. Improving gross margin is simple. You must either raise prices or reduce cost of goods sold. But, there is a little more to it than that when you consider net profit. Consider doing an activity based costing analysis on your entire account base. There are plenty of instruction manuals published on how to do this. I guarantee you that you will find some surprises. You should also consider implementing a "Margin Hold" system that forces management approval on orders entered below a minimum established threshold for gross margin percentage.On the Sales SideUltimately to create margin improvement, your entire sales team must have good judgment of market potential as it relates to margin improvement. They must be self disciplined and make intelligent decisions based on fact. Each territory manager must develop his own plan for profit improvement and be flexible on the implementation of that plan. They must be action oriented and customer driven and yet be extremely conscious of profitability objectives.Results must be measured against the plan. Trend lines need to be established both on revenue and profit growth. They must be able to see the rewards for their efforts. They must accept responsibility and accountability for improved profitability and achievement of established objectives. They need to understand activity based costing.On the Buy SideThe buy side of the equation also offers numerous opportunities for margin improvements. Approach all of your vendors. Don't be afraid to demand cost reductions. Your customers certainly aren't embarrassed to ask you. Review your entire purchasing organization. Do you have true buyers or are they simply order schedulers.Establish specific inventory reduction goals, turn-rate increase and fill rate improvement. Incenticize the critical success factors on the buy side, factors such as, margin improvement, inventory reduction and inventory turn rates. Include any others specific to your initiatives for profitability.Try to take advantage of any "itchy-scratchy" opportunities. (A new term I learned from some friends in Detroit.) These are opportunities where you are buying a product from someone that uses the types of products you distribute. The academic term is "reciprocity". The following is a checklist to review when considering margin improvement objectives.• Do you have an established pricing policy?• Do your pricing policies consider market segmentation, risk, service levels and value added?• Is your counter sales/will call priced according to margin objectives?• Do you have well trained buyers and do they negotiate?• Is your purchasing/inventory control department managing the inventory well? Are they using the correct volume discount and item analysis?• How do you measure your fill rate? Do you bench mark it to your competition?• Do you have a system to review and evaluate your RGA's? (Return Goods Authorization)• Do you charge for restocking?• Are you getting the optimum discounts from your supplier and are you keeping the discounts as profit?• Have you done a supplier profitability analysis?• Are your customers profitable?• Do you have significant supplier error?• Do you have a vendor returns program and do you manage it well?• Do you track your own and your suppliers on time delivery?
• Are you selling the right products to the right customers?• Do you have an outcall program?• Does your inside sales force understand the concept of up selling?• Is your warehouse operating efficiently?• Do you have a freight recovery program or do you fold under pressure and give it all away?• Do you rank and evaluate your customers by gross margin dollars and gross margin percentages?• Do you have an incentive program that is tied to gross margin growth both in dollars and percentages?On the buy side of the equation, you must be able to determine which of your suppliers enhance your margin opportunities and which suppliers detract from it. Add up all the things that each supplier does to help you increase profitability.Supplier Margin Contribution EnhancementWhat is your discount structure with your supplier and how does it rank in your competitive analysis? Are you getting the same discount or better than your competition? What are your total gross margin dollars earned by supplier? Rank your suppliers accordingly to be used as a weight factor. Apply a 1 to the lowest ranking, a ten to the highest and an appropriate number for those in between.Group your suppliers into dollar categories to minimize the number of rankings. If you have one hundred suppliers, apply the 80/20 rule and rank the top ten, the middle grouping and the bottom 10. Apply any form of this scale that makes sense to your specific circumstance. The objective of this exercise is to simply determine if your suppliers are making a genuine effort to enhance your profitability.Include cash discounts, rebates, co-op advertising, special terms and any other special incentives offered. Quantify in dollars all the enhancements each supplier offers.Supplier Margin DetractionQuantify each and every issue that contributes negatively from profit enhancement. Issues to be considered are excessive inventory carrying costs due to extended lead times, late shipments, missed deliveries, inability to direct ship, excessive conversion costs, rework, packaging issues, lack of or restrictive return policy and the general level of co-operation and willingness to keep you competitive in the market. Some of these issues are easily quantifiable. Others may require an arbitrary assigned dollar figure based strictly on gut feeling. What is the real cost of a lost order, a late shipment etc.? Guesstimates are okay as long as you are consistent in your application. Total all those negative costs to determine Supplier Margin Detraction.Common Margin Detractors• Short shipments/wrong counts• Missed promise date• Damaged goods• Partial shipment• Lost back order• Incorrect technical advise• Pricing errors• Wrong or no part number• No packing slip• Illegible documents• No PO number• Duplicate shipments• Wrong PO number• Poor customer service/response• Faulty products• Difficult claim procedures• Shipment to wrong location• Non responsive to emergency requestsSupplier Profitability RatioWe can now determine The Margin Enhancement Rating and The Margin Detraction Rating so we can create a Supplier Profitability Ratio using the following formula.TGM= Total Gross MarginME= Margin EnhancementMD= Margin DetractionSR= Supplier RatingSPR= Supplier Profitability RatioMC = Margin ContributionSUPPLIER PROFITABILITY RATIO1000 divided by ME-MD X SR X 100 = SPRExample:Margin Enhancement = $230,000.00Margin Detraction = $110,000.00Supplier Rating = 81000 divided by $230m-$110m X 8 = .066 X 100 = 6.6This formula is by no means scientifically accurate. In fact, it is an arbitrary conception designed specifically for the exercise and not the result. The rating itself is not of significance here. What is significant is the exercise itself. It forces you to take a serious look at true vendor performance. List your vendors by their profitability ratios. This should be an eye opening exercise. Take this information and use it in your discussions and negotiations with your vendors. Be careful not to reveal all the details of your rating as it can be easily challenged due to the intangible assignment of various factors. However, it can be invaluable in discussing many supplier issues contributing to margin detraction.What does a "stock out" really cost? How are missed deliveries impacting your customer's service and lost business opportunities? Offer your suppliers an option, improve the ratio performance or increase discounts. Lastly when looking at Margin Improvement and increasing sales revenue a supply chain analysis is beneficial.Visit http://www.ceostrategist.com and review the article "Looking for Gold? Prospect Your Pricing System."
Dr. Rick Johnson (rick@ceostrategist.com) is founder of CEO Strategist LLC. an experienced based firm specializing in leadership for wholesale distribution. CEO Strategist LLC. works in an advisory capacity with company executives in board representation, executive coaching, team coaching and education and training to make the changes necessary to create or maintain competitive advantage. You can contact them by calling 352-750-0868, or visit http://www.ceostrategist.com for more information.
Rick received an MBA from Keller Graduate School in Chicago, Illinois and a Bachelor's degree in Operations Management from Capital University, Columbus Ohio and his PhD in strategic Leadership.
Keyword : Vendor management, procurement, margin improvement, purchasing, gross profit,
Margin management is not rocket science. Improving gross margin is simple. You must either raise prices or reduce cost of goods sold. But, there is a little more to it than that when you consider net profit. Consider doing an activity based costing analysis on your entire account base. There are plenty of instruction manuals published on how to do this. I guarantee you that you will find some surprises. You should also consider implementing a "Margin Hold" system that forces management approval on orders entered below a minimum established threshold for gross margin percentage.On the Sales SideUltimately to create margin improvement, your entire sales team must have good judgment of market potential as it relates to margin improvement. They must be self disciplined and make intelligent decisions based on fact. Each territory manager must develop his own plan for profit improvement and be flexible on the implementation of that plan. They must be action oriented and customer driven and yet be extremely conscious of profitability objectives.Results must be measured against the plan. Trend lines need to be established both on revenue and profit growth. They must be able to see the rewards for their efforts. They must accept responsibility and accountability for improved profitability and achievement of established objectives. They need to understand activity based costing.On the Buy SideThe buy side of the equation also offers numerous opportunities for margin improvements. Approach all of your vendors. Don't be afraid to demand cost reductions. Your customers certainly aren't embarrassed to ask you. Review your entire purchasing organization. Do you have true buyers or are they simply order schedulers.Establish specific inventory reduction goals, turn-rate increase and fill rate improvement. Incenticize the critical success factors on the buy side, factors such as, margin improvement, inventory reduction and inventory turn rates. Include any others specific to your initiatives for profitability.Try to take advantage of any "itchy-scratchy" opportunities. (A new term I learned from some friends in Detroit.) These are opportunities where you are buying a product from someone that uses the types of products you distribute. The academic term is "reciprocity". The following is a checklist to review when considering margin improvement objectives.• Do you have an established pricing policy?• Do your pricing policies consider market segmentation, risk, service levels and value added?• Is your counter sales/will call priced according to margin objectives?• Do you have well trained buyers and do they negotiate?• Is your purchasing/inventory control department managing the inventory well? Are they using the correct volume discount and item analysis?• How do you measure your fill rate? Do you bench mark it to your competition?• Do you have a system to review and evaluate your RGA's? (Return Goods Authorization)• Do you charge for restocking?• Are you getting the optimum discounts from your supplier and are you keeping the discounts as profit?• Have you done a supplier profitability analysis?• Are your customers profitable?• Do you have significant supplier error?• Do you have a vendor returns program and do you manage it well?• Do you track your own and your suppliers on time delivery?
• Are you selling the right products to the right customers?• Do you have an outcall program?• Does your inside sales force understand the concept of up selling?• Is your warehouse operating efficiently?• Do you have a freight recovery program or do you fold under pressure and give it all away?• Do you rank and evaluate your customers by gross margin dollars and gross margin percentages?• Do you have an incentive program that is tied to gross margin growth both in dollars and percentages?On the buy side of the equation, you must be able to determine which of your suppliers enhance your margin opportunities and which suppliers detract from it. Add up all the things that each supplier does to help you increase profitability.Supplier Margin Contribution EnhancementWhat is your discount structure with your supplier and how does it rank in your competitive analysis? Are you getting the same discount or better than your competition? What are your total gross margin dollars earned by supplier? Rank your suppliers accordingly to be used as a weight factor. Apply a 1 to the lowest ranking, a ten to the highest and an appropriate number for those in between.Group your suppliers into dollar categories to minimize the number of rankings. If you have one hundred suppliers, apply the 80/20 rule and rank the top ten, the middle grouping and the bottom 10. Apply any form of this scale that makes sense to your specific circumstance. The objective of this exercise is to simply determine if your suppliers are making a genuine effort to enhance your profitability.Include cash discounts, rebates, co-op advertising, special terms and any other special incentives offered. Quantify in dollars all the enhancements each supplier offers.Supplier Margin DetractionQuantify each and every issue that contributes negatively from profit enhancement. Issues to be considered are excessive inventory carrying costs due to extended lead times, late shipments, missed deliveries, inability to direct ship, excessive conversion costs, rework, packaging issues, lack of or restrictive return policy and the general level of co-operation and willingness to keep you competitive in the market. Some of these issues are easily quantifiable. Others may require an arbitrary assigned dollar figure based strictly on gut feeling. What is the real cost of a lost order, a late shipment etc.? Guesstimates are okay as long as you are consistent in your application. Total all those negative costs to determine Supplier Margin Detraction.Common Margin Detractors• Short shipments/wrong counts• Missed promise date• Damaged goods• Partial shipment• Lost back order• Incorrect technical advise• Pricing errors• Wrong or no part number• No packing slip• Illegible documents• No PO number• Duplicate shipments• Wrong PO number• Poor customer service/response• Faulty products• Difficult claim procedures• Shipment to wrong location• Non responsive to emergency requestsSupplier Profitability RatioWe can now determine The Margin Enhancement Rating and The Margin Detraction Rating so we can create a Supplier Profitability Ratio using the following formula.TGM= Total Gross MarginME= Margin EnhancementMD= Margin DetractionSR= Supplier RatingSPR= Supplier Profitability RatioMC = Margin ContributionSUPPLIER PROFITABILITY RATIO1000 divided by ME-MD X SR X 100 = SPRExample:Margin Enhancement = $230,000.00Margin Detraction = $110,000.00Supplier Rating = 81000 divided by $230m-$110m X 8 = .066 X 100 = 6.6This formula is by no means scientifically accurate. In fact, it is an arbitrary conception designed specifically for the exercise and not the result. The rating itself is not of significance here. What is significant is the exercise itself. It forces you to take a serious look at true vendor performance. List your vendors by their profitability ratios. This should be an eye opening exercise. Take this information and use it in your discussions and negotiations with your vendors. Be careful not to reveal all the details of your rating as it can be easily challenged due to the intangible assignment of various factors. However, it can be invaluable in discussing many supplier issues contributing to margin detraction.What does a "stock out" really cost? How are missed deliveries impacting your customer's service and lost business opportunities? Offer your suppliers an option, improve the ratio performance or increase discounts. Lastly when looking at Margin Improvement and increasing sales revenue a supply chain analysis is beneficial.Visit http://www.ceostrategist.com and review the article "Looking for Gold? Prospect Your Pricing System."
Dr. Rick Johnson (rick@ceostrategist.com) is founder of CEO Strategist LLC. an experienced based firm specializing in leadership for wholesale distribution. CEO Strategist LLC. works in an advisory capacity with company executives in board representation, executive coaching, team coaching and education and training to make the changes necessary to create or maintain competitive advantage. You can contact them by calling 352-750-0868, or visit http://www.ceostrategist.com for more information.
Rick received an MBA from Keller Graduate School in Chicago, Illinois and a Bachelor's degree in Operations Management from Capital University, Columbus Ohio and his PhD in strategic Leadership.
Keyword : Vendor management, procurement, margin improvement, purchasing, gross profit,
Problem Solving: This Simple Process helps Identify Creative Solutions to Difficult Problems
Author : Doug Staneart
Five years ago, a couple of instructors that I was working with and I were brainstorming about different ways to promote our training programs more easily. Up to that point, I had spent my entire career in training focused primarily on helping individuals become more successful by helping them strengthen certain skill sets such as public speaking, management skills, and selling skills. We noticed that out of our classes, about 80% of participants were individuals, about 15% came with a friend, and about 5% came as a group. We knew that these groups who attended together leveraged the results of the programs significantly, because they held each other accountable for implementation of the skills. They also discussed the class within the office setting. What we didn't know was why more teams weren't registering.We decided to use the problem solving process that we teach in our classes to see if we could come up with different ways to increase group enrollment.Step #1: Identify the Specific Problem and Create a One-Sentence Description.This step sounds easy, but it is actually the most difficult and the most critical step as well. If your problem statement is too vague, then you will likely struggle with trying to come up with valid solutions. Also, if the problem statement is too encompassing, then a solution might be too complex to easily implement. For example, if we decide that the problem we want to overcome is poor customer service, then the group is likely to spend countless hours trying to first define customer service, and then coming up with every solution under the sun to try to fix the customer service problem. The success of the solution would be hard to measure. However, if we broke customer service into more specific parts such as eliminating rudeness from our call center agents or increasing repeat sales from existing customers, then we could more easily solve a complex problem.In the example above where I mentioned that our instructors wanted to increase group participation, our original problem statement was related to increasing repeat business from first time clients. After a little investigation we found that companies that sent two or more people to our classes were 30 times more likely to send people in the future than companies that sent an individual. When we identified that trend, we created a more specific problem statement which was, "In what was can we increase group participation in our classes?"Step #2: What are the Possibly CausesA common error at this point in the process is to jump right into looking for solutions to the problem before trying to identify the root causes of the problem. This usually results in a "band-aid" solution or a solution that just treat symptoms. It would be like reaching under your dashboard and clipping the wire to your "Check Engine" light. Sure you won't see the light anymore, but the underlying root cause and root problem in the engine is still there.Take some time to identify what some of the root causes of the problem are, and your team will come up with solutions to these root causes much more quickly.In our example, we started looking at the way our company marketed our programs and found some glaring causes that we had overlooked time and time again. The underlying root cause that we found was that our entire marketing effort was geared toward individuals. Our marketing pieces said things like "helps YOU overcome the fear of public speaking." Our registration form only had room for one person's name. We had no group discounts. These were all root causes.Step #3: What are the Possible SolutionsOnce the root causes are uncovered, solutions should start popping like popcorn. In our case, we redesigned our registration form and marketing pieces and began offering a group discount. In the next six months, out percentage of group registrations versus individual registrations tripled. In the next six months, the percentage of group registrations tripled again.In our case, we had a number of solutions to choose from and each was helpful in helping solve our problem, but in some cases, you may have to weed out possible solutions to discover a best possible solution.Step #4: What's the Best Possible SolutionIn this step, you'll want to weigh the pros and cons of each solution to determine what is the best plan of action based on what we know today. You may find that half way through implementation that one of the other solutions might work better. It's okay to regroup and begin to implement another solution if the first "Best Possible Solution" turns out to be a poor choice after all. Don't be afraid to take risks, though. Be willing to go out on a limb to create a breakthrough.Step #5: Create an Implementation PlanMost problem-solving meetings end when the solution is determined. Don't fall into this trap though. Once the solution is decided upon, create a detailed plan of action that hold specific people accountable for implementation. By doing this, you ensure that the solution that you worked so hard for actually pays off for you and your company.Doug Staneart, doug@leaderinstitute.com is CEO of The Leader's Institute, www.leadersinstitute.com, specializing in leadership, public speaking, and team building training for individuals and groups. He can be reached toll-free at 1-800-872-7830.
Keyword : problem solving, conflict resolution, management
Five years ago, a couple of instructors that I was working with and I were brainstorming about different ways to promote our training programs more easily. Up to that point, I had spent my entire career in training focused primarily on helping individuals become more successful by helping them strengthen certain skill sets such as public speaking, management skills, and selling skills. We noticed that out of our classes, about 80% of participants were individuals, about 15% came with a friend, and about 5% came as a group. We knew that these groups who attended together leveraged the results of the programs significantly, because they held each other accountable for implementation of the skills. They also discussed the class within the office setting. What we didn't know was why more teams weren't registering.We decided to use the problem solving process that we teach in our classes to see if we could come up with different ways to increase group enrollment.Step #1: Identify the Specific Problem and Create a One-Sentence Description.This step sounds easy, but it is actually the most difficult and the most critical step as well. If your problem statement is too vague, then you will likely struggle with trying to come up with valid solutions. Also, if the problem statement is too encompassing, then a solution might be too complex to easily implement. For example, if we decide that the problem we want to overcome is poor customer service, then the group is likely to spend countless hours trying to first define customer service, and then coming up with every solution under the sun to try to fix the customer service problem. The success of the solution would be hard to measure. However, if we broke customer service into more specific parts such as eliminating rudeness from our call center agents or increasing repeat sales from existing customers, then we could more easily solve a complex problem.In the example above where I mentioned that our instructors wanted to increase group participation, our original problem statement was related to increasing repeat business from first time clients. After a little investigation we found that companies that sent two or more people to our classes were 30 times more likely to send people in the future than companies that sent an individual. When we identified that trend, we created a more specific problem statement which was, "In what was can we increase group participation in our classes?"Step #2: What are the Possibly CausesA common error at this point in the process is to jump right into looking for solutions to the problem before trying to identify the root causes of the problem. This usually results in a "band-aid" solution or a solution that just treat symptoms. It would be like reaching under your dashboard and clipping the wire to your "Check Engine" light. Sure you won't see the light anymore, but the underlying root cause and root problem in the engine is still there.Take some time to identify what some of the root causes of the problem are, and your team will come up with solutions to these root causes much more quickly.In our example, we started looking at the way our company marketed our programs and found some glaring causes that we had overlooked time and time again. The underlying root cause that we found was that our entire marketing effort was geared toward individuals. Our marketing pieces said things like "helps YOU overcome the fear of public speaking." Our registration form only had room for one person's name. We had no group discounts. These were all root causes.Step #3: What are the Possible SolutionsOnce the root causes are uncovered, solutions should start popping like popcorn. In our case, we redesigned our registration form and marketing pieces and began offering a group discount. In the next six months, out percentage of group registrations versus individual registrations tripled. In the next six months, the percentage of group registrations tripled again.In our case, we had a number of solutions to choose from and each was helpful in helping solve our problem, but in some cases, you may have to weed out possible solutions to discover a best possible solution.Step #4: What's the Best Possible SolutionIn this step, you'll want to weigh the pros and cons of each solution to determine what is the best plan of action based on what we know today. You may find that half way through implementation that one of the other solutions might work better. It's okay to regroup and begin to implement another solution if the first "Best Possible Solution" turns out to be a poor choice after all. Don't be afraid to take risks, though. Be willing to go out on a limb to create a breakthrough.Step #5: Create an Implementation PlanMost problem-solving meetings end when the solution is determined. Don't fall into this trap though. Once the solution is decided upon, create a detailed plan of action that hold specific people accountable for implementation. By doing this, you ensure that the solution that you worked so hard for actually pays off for you and your company.Doug Staneart, doug@leaderinstitute.com is CEO of The Leader's Institute, www.leadersinstitute.com, specializing in leadership, public speaking, and team building training for individuals and groups. He can be reached toll-free at 1-800-872-7830.
Keyword : problem solving, conflict resolution, management
Key Employees Can and Will Leave Your Business, are You Prepared?
Author : Justin Woolich
Very few businesses can claim to be prepared for the loss of key employees. Quite often it is an unexpected and unplanned for event that causes quite a bit of disruption to 'business as usual'.It is quite a gut wrenching experience to see an employee you have worked with over a period of time leaving your business. Even if the parting of ways is on good terms with a period of handover, you just know that there is so much information walking out the door with your former employee and there is nothing you can do about it.And this is only just the beginning...While labouring through a period of being understaffed and overworked you are then faced with the task of recruiting a new employee to fill the vacant position. This is followed by the inevitable probation and training period where, hopefully the new employee comes up to speed and is able to pick up where the former employee left off.The problem is: What exactly was it that the former employee really did? They always seemed to be busy and on the rare occasion that they were absent due to illness, there were those problems that arose that were only truly resolved when they returned and took control and 'cleaned things up'.There has to be a better way...Fortunately quite a bit can be done to minimize the impact of situations like this on our business. And like most truly worthwhile solutions the steps required to complete this part of your business development does take some effort on your part.There is an established path that you can follow to get your business in order and the benefits to you and your employees are much farther reaching than just minimizing the impact of key employees leaving you.The following is by no means a definitive list of what is required. But it does give you some idea of the steps required.1) Create a flexible forward thinking Organization Chart defining the positions you require in your business.
2) Determine what the responsibilities are for the positions in your business.
3) Assign Employees to relevent positions in the Business.
4) Document key information that is critical to your business and make it available to your employees.
5) Work with your employees to define what it is they do, how they do it and most importantly how it could be done better.
6) Record, optimize then implement the business systems you have identified.
7) Assign the business systems to the relevant positions and monitor their use.By consistently following these steps for all positions in your business you will insulate yourself from some of the problems that occur when key employees leave your business.Start a Free Trial of Business Systems Manager today and find out how we can help you to free yourself from the concerns of loosing your key employees and take your Business Development to the next level.
Keyword : Employee Business Development
Very few businesses can claim to be prepared for the loss of key employees. Quite often it is an unexpected and unplanned for event that causes quite a bit of disruption to 'business as usual'.It is quite a gut wrenching experience to see an employee you have worked with over a period of time leaving your business. Even if the parting of ways is on good terms with a period of handover, you just know that there is so much information walking out the door with your former employee and there is nothing you can do about it.And this is only just the beginning...While labouring through a period of being understaffed and overworked you are then faced with the task of recruiting a new employee to fill the vacant position. This is followed by the inevitable probation and training period where, hopefully the new employee comes up to speed and is able to pick up where the former employee left off.The problem is: What exactly was it that the former employee really did? They always seemed to be busy and on the rare occasion that they were absent due to illness, there were those problems that arose that were only truly resolved when they returned and took control and 'cleaned things up'.There has to be a better way...Fortunately quite a bit can be done to minimize the impact of situations like this on our business. And like most truly worthwhile solutions the steps required to complete this part of your business development does take some effort on your part.There is an established path that you can follow to get your business in order and the benefits to you and your employees are much farther reaching than just minimizing the impact of key employees leaving you.The following is by no means a definitive list of what is required. But it does give you some idea of the steps required.1) Create a flexible forward thinking Organization Chart defining the positions you require in your business.
2) Determine what the responsibilities are for the positions in your business.
3) Assign Employees to relevent positions in the Business.
4) Document key information that is critical to your business and make it available to your employees.
5) Work with your employees to define what it is they do, how they do it and most importantly how it could be done better.
6) Record, optimize then implement the business systems you have identified.
7) Assign the business systems to the relevant positions and monitor their use.By consistently following these steps for all positions in your business you will insulate yourself from some of the problems that occur when key employees leave your business.Start a Free Trial of Business Systems Manager today and find out how we can help you to free yourself from the concerns of loosing your key employees and take your Business Development to the next level.
Keyword : Employee Business Development
Thoughts from a Post-Thanksgiving Nap
Author : Larry Galler
Leaning back in my post-Thanksgiving glow, I snuggled in my easy chair, put my feet up, sighed, and read my book until the need for a nap overtook me in a few moments. We all like our comfort. As a culture we certainly prefer comfort to discomfort. The problem is that being in a place of comfort lulls us. It lulls us from thinking, from learning, from activity, from progress, from growth. It's exactly the same in business.Comfortable businesses tend to coast. They stagnate. They have reached a comfortable state of existence with comfortable earnings, comfortable staff, comfortable systems, comfortable levels of stress. They have stopped getting better because they don't need to get better (or don't think they need to get better). That's a nice place to be but a difficult place to stay.While your company is settling back into that easy chair and taking a mid-day nap, your hungry, lean-and-mean, unsatisfied competitor is working hard to make your customers defect. At the same time, your marketplace is changing – the products and services they want are not the products and services they wanted last year or will want next year. New technologies have shifted the playing field and it is not going to stop soon, or ever.If your business is comfortable it is time to throw a bucket of ice-cold water on that napping, comfy existence before exterior forces demand you wake up and do something about it. How do you start towards uncomfortableness? By becoming unsatisfied.Take a look at the goals you are working towards. Become unsatisfied with one specific goal and stretch it. If the goal calls for producing 100 widgets per hour stretch it and demand 110 per hour. If it is increasing the staff retention rate by 10% per year stretch it and demand 15%. Over time, stretch more goals. Inspire the staff, commit the resources, create accountabilities and bring the snap of vitality to your organization.Resting comfortably is great once in a while, but come back with a "fire in the belly" instead of one more piece of that delicious pumpkin pie.Larry Galler coaches and consults with high-performance executives, professionals, and small businesses since 1993. He is the writer of the long-running (every Sunday since November 2001) business column, "Front Lines with Larry Galler" Sign up for his free newsletter at http://www.larrygaller.com
Leaning back in my post-Thanksgiving glow, I snuggled in my easy chair, put my feet up, sighed, and read my book until the need for a nap overtook me in a few moments. We all like our comfort. As a culture we certainly prefer comfort to discomfort. The problem is that being in a place of comfort lulls us. It lulls us from thinking, from learning, from activity, from progress, from growth. It's exactly the same in business.Comfortable businesses tend to coast. They stagnate. They have reached a comfortable state of existence with comfortable earnings, comfortable staff, comfortable systems, comfortable levels of stress. They have stopped getting better because they don't need to get better (or don't think they need to get better). That's a nice place to be but a difficult place to stay.While your company is settling back into that easy chair and taking a mid-day nap, your hungry, lean-and-mean, unsatisfied competitor is working hard to make your customers defect. At the same time, your marketplace is changing – the products and services they want are not the products and services they wanted last year or will want next year. New technologies have shifted the playing field and it is not going to stop soon, or ever.If your business is comfortable it is time to throw a bucket of ice-cold water on that napping, comfy existence before exterior forces demand you wake up and do something about it. How do you start towards uncomfortableness? By becoming unsatisfied.Take a look at the goals you are working towards. Become unsatisfied with one specific goal and stretch it. If the goal calls for producing 100 widgets per hour stretch it and demand 110 per hour. If it is increasing the staff retention rate by 10% per year stretch it and demand 15%. Over time, stretch more goals. Inspire the staff, commit the resources, create accountabilities and bring the snap of vitality to your organization.Resting comfortably is great once in a while, but come back with a "fire in the belly" instead of one more piece of that delicious pumpkin pie.Larry Galler coaches and consults with high-performance executives, professionals, and small businesses since 1993. He is the writer of the long-running (every Sunday since November 2001) business column, "Front Lines with Larry Galler" Sign up for his free newsletter at http://www.larrygaller.com
Questions??? Send an email to larry@larrygaller.com
Keyword : momentum, inspire, spirit
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