As a business, it’s commonplace to direct attention to your return on investment (ROI).
You don’t want to lose money, so you’re constantly analysing the ROI of everything you do.
But there’s another cost that isn’t always considered: The Cost of Inaction.
Instead of thinking about ROI, have a think about COI. What is the cost of not moving forward?
What does the Cost of Inaction mean?
In essence, the cost of inaction is the cost you incur from not doing something to grow your business. It’s the “opportunity cost” of doing nothing instead of something.
In your personal life, you may have a bill and you’re about to lose the new customer discount.
In your work life, as your organisation has evolved, your manual processes may no longer be fit for purpose.
What will happen if you do nothing?
In both scenarios, you’ll end up paying more.
If your bill goes up it’s an easy amount of money to measure. With your processes, it’s not always as obvious.
If it’s hiring a new team member, the cost is clearer. But perhaps it could be something you don’t see as readily, maybe:
- Team members move on due to the extra workload and pressure
- You can’t access the information you need to make decisions
- Your processes are creating bottlenecks and preventing your growth
Each of these is an outcome if you don’t do the right thing in your organisation.
Over time, these costs add up. And while you may not notice them on a day-to-day basis, they impact your business, profitability, and productivity. You see them in the form of inefficient financial management processes, errors in your reports, poor resource planning, and even slow decision-making.
What can you do about the Cost of Inaction in your business?
The first step is to recognise that the cost of inaction exists, it’s just harder to quantify than ROI.
When you sit down and evaluate the cost of inaction, it can help push you forward and helps you realise why and where you need to act.
Here are some steps to help you with this process:
1. Analyse your current situation
Make a list of your current issues or opportunities, analyse them, and identify the ones that will cost you the most if you do nothing.
To give this some context, we’ll focus on the finance department and how this can be applied. But it goes without saying, the cost of in-action applies to all departments within a business!
As a starter, is your finance team still depending on a manual, paper-based system to manage your accounts?
The costs of inaction, in this case, could include:
- Time lost every week going through the process instead of over other work
- Errors being made due to manual processing
- Inability to be agile in your decision-making or reporting
This would be a good time to ask yourself, am I missing out on automating processes that could make my team more efficient?
What you’d need to do is reevaluate your accounting system to see if you need a change of software.
Once you identify the impact of not moving forward, it’s an easy step to see why you need to act.
2. Determine what you want
What is it that you really want to happen?
Is it having a financial management system that’s integrated with your other processes and gives reliable profitability data?
Is it having a streamlined process so you can deliver on time to your customers?
This is where you can set your goals and targets.
Once you have a clear idea of what the future will look like, you’ll be able to determine what you need to do to get there.
3. Define how you’ll get there
Now that you know what you want and why it’s important, come up with an action plan.
How can you move forward and achieve your goal? For instance, if you need to implement a new finance system, determine what needs to happen first. Which steps need to be completed and what will be involved?
Also, what are the milestones or metrics you need to be measuring? Clearly identify key performance indicators that can help you measure your success. This will help you know if you’re on track.
4. Take action!
This is the “main event” of it all. After all, your COI is the cost of doing nothing instead of something.
Start implementing your action plan. If you need to change your finance system, then go for it.
Be open to new opportunities, technologies, and innovations. Always be looking for ways to improve.
Change might not happen overnight but starting now to take action will be worth it.
Conclusion
The cost of inaction is real. Have a think about your COI and what you can do to overcome it.
Inaction is what keeps a business stagnant when everyone else is moving forward.
If you’re not doing something, your competitors probably are. If you’re not moving forward, you’re falling back.
Talk to FinanSys today about moving forward with your financial system.
