How to Break the Cycle of Bad Data

Today’s subject is very near and dear to my heart – taking out the garbage & cleaning up your data!

I’ve spent my entire career in small business.

And I’ve seen some pretty scary stuff when it comes to data quality.

At one company, I found almost $100k that they had paid to vendors for products that had never been received! All because no one had the time to review open purchase orders!

At another company, I saw delays of two to four weeks in sending invoices to customers because paperwork couldn’t be located. Many of these invoices were over $50k each! To make it worse, some of their customers paid 30 days late!

I’ve seen inventory count discrepancies of over $250k in a single month because data wasn’t entered into the system correctly or materials were mislabeled.

These kinds of mistakes can bankrupt a business.

And yet they happen every day.

Even on a smaller scale, data mistakes can cost tens of thousands of dollars over time.

But if it’s so costly, why does this happen?

In my experience, there’s three main issues that lead to situations like this:

No. 1 – A company is growing too fast to keep up with much needed systems & process improvements

Picture this: Your sales are increasing quarter over quarter, sometimes doubling, or even tripling. Business is booming! It’s all you can do to get the orders out the door and fulfill your service obligations. Sounds great, right?

Operating at or above capacity takes a toll on you, your team, and your systems. You can manage it for a short time, but if this becomes the norm, your business will break. Paperwork will get lost. Customer requests will go unanswered. Invoices will be issued late. Your operations will fall behind and data will be the first thing to suffer in the name of fulfilling the order.

No. 2 – Quality data is underappreciated. It’s considered a clerical issue and it can be fixed at some later date

This is typically a symptom of growing too fast, but I have seen owners who truly believe data is an afterthought. You may have heard of the phrase “sales cures all”. You’ll hear this touted as the answer many times when a company is struggling. Just sell more and everything will magically be ok. There’ll be plenty of cash flow to hire someone to deal with the data and get it all wrapped up nice and pretty. But just selling more can actually make it worse, putting your back office even more behind and taking longer to collect on orders.

No. 3 – Lack of experience in the management team

Small business owners have a bad habit of hiring their friends to come work with them, even when those friends aren’t the best fit. They also like the “hire cheap and train” method to keep payroll costs down. This can be effective with your front-line employees, but your management team should have experience doing what it is you want them to do. They’re supposed to be a buffer between you and the day-to-day activities of the business. It’s their job to recommend improvements, hire & train employees, and ensure that the company is meeting its goals. But if they are inexperienced, they may not know what to look for.

Cleaning up Your Data Issues

Did any of those 3 points resonate with you?

If so, that’s ok.

You’ve got a lot on your plate running a business and it’s hard to know every little thing to look out for AND fix it before it becomes a major issue.

The important thing is looking at your business objectively now and deciding what you’re going to do about it. Regardless of how you got here, you’re having some data issues and you want to clean them up, right?

So, let’s talk about how you do that.

Today’s subject is very near and dear to my heart – taking out the garbage & cleaning up your data!

I’ve spent my entire career in small business.

And I’ve seen some pretty scary stuff when it comes to data quality.

At one company, I found almost $100k that they had paid to vendors for products that had never been received! All because they never reviewed open purchase orders!

At another company, I saw delays of two to four weeks in sending invoices to customers because paperwork couldn’t be located to verify the weights of products shipped! Many of these invoices were over $50k each! To make it worse, their customers typically paid 30 days late!

I’ve seen inventory count discrepancies of over $250k in a single month because data wasn’t entered into the system correctly.

These kinds of mistakes can bankrupt a business.

And yet they happen every day.

Even on a smaller scale, data mistakes can cost tens of thousands of dollars over time.

?

But if it’s so costly, why does this happen?

In my experience, there’s three main issues that lead to situations like this:

No. 1 – A company is growing too fast to keep up with much needed systems & process improvements

Picture this: Your sales are increasing quarter over quarter, sometimes doubling, or even tripling. Business is booming! It’s all you can do to get the orders out the door and fulfill your service obligations. Sounds great, right? Operating at or above capacity takes a toll on you, your team, and your systems. You can manage it for a short time, but if this becomes the norm, your business will break. Paperwork will get lost. Customer requests will go unanswered. Invoices will be issued late. Your operations will fall behind and data will be the first thing to suffer in the name of fulfilling the order.

No. 2 – Quality data is underappreciated. It’s considered a clerical issue and it can be fixed at some later date

This is typically a symptom of growing too fast, but I have seen owners who truly believe data is an afterthought. You may have heard of the phrase “sales cures all”. You’ll hear this touted as the answer many times when a company is struggling. Just sell more and everything will magically be ok. There’ll be plenty of cash flow to hire someone to deal with the data and get it all wrapped up nice and pretty. But just selling more can actually make it worse, putting your back office even more behind and taking longer to collect on orders.

No. 3 – Lack of experience in the management team

Small business owners have a bad habit of hiring their friends to come work with them, even when those friends aren’t the best fit. They also like the “hire cheap and train” method to keep payroll costs down. This can be effective with your front-line employees, but your management team should have experience doing what it is you want them to do. They’re supposed to be a buffer between you and the day-to-day activities of the business. It’s their job to recommend improvements, hire & train employees, and ensure that the company is meeting its goals. But if they are inexperienced, they may not know what to look for.

Cleaning up Your Data Issues

Did any of those 3 points resonate with you?

If so, that’s ok.

You’ve got a lot on your plate running a business and it’s hard to know every little thing to look out for AND fix it before it becomes a major issue.

The important thing is looking at your business objectively now and deciding what you’re going to do about it.

Regardless of how you got here, you’re having some data issues and you want to clean them up, right?

So, let’s talk about how you do that.

No. 1 – Review your business by function and identify areas where your data is hurting you

Talk to the people doing the work – let them know you want to make their jobs easier and need some feedback from them on what they think is working well and where the gremlins are hiding. They will be more than happy to tell you!

Ask your customers and vendors for feedback. They are a great source of information! Let them know that you are doing a review of your systems and processes and would appreciate their thoughts on what is working well and where you could make it easier for them to work with you.

No. 3 – Determine which items would make the most improvement for the company as a whole

In my experience, being able to find the information you need when you need it and having open communication between everyone involved in a process goes a long way to making an issue less painful while you’re working on solving the larger structural pieces.

The important thing is to get the short-term win. Just like when you’re building new habits, making a small improvement to a painful situation at work can make a huge difference in how people respond to further efforts.

No. 4 – Prioritize your list from greatest impact to least impact

Based on impact, what do you think you should do first?

• Improve communication?
• Get better visibility on projects or order status?
• Hire a consultant?

No. 5 – Assess time and cost to implement each item

Next, look at your list to determine cost and time.

You just need a rough estimate here. It acts as a gut check to make sure you’re not taking on more than you can handle financially at one time as well as keeping your current capacity in mind. If you need to hire someone, include that in the estimate.

No. 6 – Choose one project from the list to work on at a time

Now that you’ve analyzed your list by impact, cost, and time, you’re ready to decide where you want to start.

Choose one item to work on at a time.

Now, I can already here the objections.

If we do these two or three at the same time, things will get better faster!

Are you sure?

There’s a ripple effect that happens when you make changes in your business.

What you change in sales affects ops and accounting, and vice versa.

Sometimes, you can easily see where it’s going to cause challenges and sometimes you can’t. If you choose one thing at a time, you can make changes slowly, allow time for the change to work its way through the organization, make adjustments when conflicts come up, and make sure that things are working smoothly before moving on to the next item.

You may find that some of the issues on your list go away in time as other things are improved. You’ll also ensure that you know for sure what fixed the problem. If you implement 5 things at once, how do you know what worked or isolate related issues as they come up?

Take your time.

Track your results.

Adjust over time.

Then, when you’re happy with the results, move on to the next item on your list!

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