Turning tables is important, but if it were the only objective, the model would be that of a fast-food canteen: attractive prices, quick service and modest quality. A good restaurant aims for something broader: the pleasant time customers spend at the table while savouring their dishes. It is this whole that makes the moment of dining pleasant and leads people to repeat the experience.

Good service, in fact, is made up of three times. Waiting time, which must be reasonable. Dining time, which must be pleasant, with dishes arriving at the right moment. And the time of emotions, which comes back to mind later and leads people to repeat the experience. A relationship with a broad customer base is built through collaboration between front-of-house and kitchen staff: front of house reads the rhythm of each table, the kitchen respects it and the customer remembers the overall experience.

This broadens the concept of turnover. It is not based on a single sitting, but on a longer period such as the month, during which customers return: they are the true intangible asset, which does not appear on the balance sheet but makes everything that is there earn a return.

What is there is the restaurant’s invested capital: premises furnished from the entrance to the toilets, plates and cutlery, the lighting that creates the atmosphere. These are the resources used directly with the customers who enjoy the service. A dining room filled with regulars makes them earn a return; a half-empty one leaves them idle. Front-of-house and kitchen staff can do a great deal about this. About the mortgage on the premises or the bank’s terms, however, they can do nothing.

For an SME, invested capital works in the same way. Its return depends on two factors: the average sales margin and how many times it turns over during the year.

The problem is that, in its accounting form, invested capital is a concept far removed from operations, because it brings together trade receivables, tax credits, inventory and equity investments, capital equipment and cash. Presented like this, it means little to operational staff. And if something has little meaning, it is not important and therefore it is not managed.

Completeness, in fact, is the enemy of effectiveness. To be a parameter for operational use, invested capital must have a direct link with core operations, and people must be convinced that their good work improves things. That is why its operational configuration is limited to three main line items.

The first is trade receivables. Payment terms that are honoured, prompt invoicing, the handling of complaints and payment reminders, with sales and administration acting to close them quickly.

The second is inventory. Stock levels, purchase lot sizes, production scheduling and slow-moving products are in the hands of purchasing, production and logistics.

The third is the part of fixed assets used directly with customers. In the restaurant, these are the premises, the furnishings and the tableware; in other businesses, they may be the coffee machines lent to cafés or any other equipment entrusted to customers. Their return depends on how much customers use them, and therefore on the quality of service provided by the people who look after those customers every day.

Everything else should be left out. Financial assets and liabilities, tax receivables and payables, and other minor line items, because they distract attention and depend on the owners’ decisions, or only indirectly on operations. Asking the warehouse manager to deal with them would be like involving the waiter in paying the restaurant’s mortgage instalment.

Let’s take an example, going back to the company with €10 million in revenue from the piece dedicated to comparison with competitors. Trade receivables of €2.5 million, around ninety days to collect. Inventory of €2 million. Assets serving customers of €3 million. Operating invested capital is €7.5 million and, with an operating margin of €750,000, it earns a 10% return.

If sales and administration bring collection back to sixty days, and purchasing and production reduce stock by €500,000, capital falls to around €6.1 million. The return rises above 12% without selling a single extra euro, and around €1.4 million becomes available in cash again. And if the same assets serve satisfied customers who buy more often, revenue grows with the same capital: this is turnover over the month, that of the restaurant frequented by its regulars.

Getting there does not require a complex report. All you need is a framework with three line items, each with its own indicator expressed in days or as a percentage, compared with the previous month and with the target. Simplicity and focus are decisive, because when these line items have a cohesive team managing them, everything else works.

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In alpine skiing, forerunners descend the course before the competitors to prepare the track. For the selected young athletes, this is an important opportunity to compare their performance with that of the competitors under identical conditions. A good coach is not content with knowing how long their athlete took: they compare their times with those of the best in the race, split time by split time.

The final time is not enough.

Knowing that you finished two seconds behind the winner tells you very little. Split times, on the other hand, tell you where: on the steep pitch, in the turn before the flat section, on the way out of the bump. That is where the following week’s training is focused.

And the benchmark is the winner, not the average of the competitors. Comparing yourself with those in the middle of the rankings is reassuring. Comparing yourself with the best makes you grow.

Reclassified financial statements are our stopwatch.

In the previous piece, we talked about the compass: the plan is the course, and management control is the tool that tells you whether you are following it. But the compass tells us whether we are heading in the right direction, not whether we are moving as fast as the others. That is why we also need a stopwatch.

For a company, the split times are found in the financial statements. Those of direct competitors are filed with the Business Register and can be obtained for a modest fee. Taken as they are, however, they are of little use: to be compared, they must be reclassified using the same criteria we apply to our own for internal use. Same track, same stopwatch. Only then do the figures become consistent and comparable.

It doesn’t take a great deal of effort. All you need is three or four carefully selected competitors, a few hours of work a year and a simple framework: an income statement based on gross margin and a balance sheet that separates the capital invested in operations from financial capital. For smaller competitors, the financial statements will be less detailed, but the main line items are always there. This is a key phase in the growth process: the goal is not absolute precision, but understanding where we stand so that we can decide where we want to go.

The split times of business management.

Each indicator is a section of the course: value added as a percentage of revenue, the weight of personnel costs, operating margin, days to collect receivables, inventory turnover and return on invested capital.

Let’s take an example. Two companies with €10 million in revenue: ours collects its receivables in 95 days, the best competitor in 60. Thirty-five days’ difference is worth almost a million euros tied up in receivables, which the competitor can use to invest, while for us it is a drain on resources. The income statement alone would never have shown this.

Comparison is done together, as between athlete and coach.

The figures tell us where we are losing time, not why. That is why they need to be brought into comparison sessions with colleagues: the sales team knows the payment terms used in the market, purchasing knows how competitors’ suppliers work, and production can explain a different level of personnel costs. These are concrete aspects, each of which someone can interpret correctly; put together, they give a complete picture.

This work brings out weaknesses, but also strengths. There are sections of the course where we are faster, and these too must be recognised and protected. The coach knows this: an athlete who sees only their own mistakes loses confidence, while one who also knows their strengths knows where to start again from.

The companies that truly improve are neither those that settle for their results nor those that chase competitors without knowing how or where to act. They are those that, like a good coach, choose the best benchmark and work one section at a time.

This is the third piece dedicated to the Management Control face of the Rubik’s cube: after J. Harrington’s model for mapping activities and the plan that supports growth, here is another piece to measure ourselves against the best and make better decisions. In the next piece, we will see how comparison with leading companies can guide the reorganisation of logistics.

In your company, do you know which section of the course you are losing time on compared with the best competitor?

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Kenning Consulting accompanies small and medium-sized businesses in building a growth plan supported by management control tools tailored to their development stage.

When the dashboard only gave signals.

Anyone who drove a car a few decades ago will remember a basic dashboard: speedometer, rev counter, fuel gauge, water temperature and a few warning lights. Each indicator measured a single value and passed the signal on to the driver. Nothing more. The oil warning light is the perfect example. When it came on, the problem was already there, and often the damage too. The dashboard told you what wasn’t working, but left it to the driver to work out why and decide what to do. When the dashboard became a system.

With the spread of electronics, the change was profound. Sensors no longer just take measurements: control units communicate with one another and coordinate the engine, brakes, gearbox and steering. If a wheel loses grip on a bend, the stability control engages the braking system as needed, reduces engine power and corrects understeer or oversteer before the driver even notices the danger.

Today’s dashboard is the visible part of this system. It suggests when to change gear, gives advance warning of maintenance and proposes the best route. From a simple status indicator, it has become a system programmed to coordinate various components and improve overall performance.

The administrative manager applies the same principle.

In a well-managed SME, the administrative function follows the same evolution. The administrative manager can no longer simply process figures to point out what isn’t working. A report showing a shrinking margin on a product line is a warning light that has come on: useful, but it only arrives once the problem is already there.

The extra step is to foster coordination among the people involved in that production process, so that together they can reach a proposed solution. Let’s think about that very shrinking margin. If the administrative manager brings together the colleague from purchasing, the production manager and the salesperson who looks after the customer, each brings their own piece of knowledge: a supplier that has changed its packaging format, a little more waste in production, a discount granted so as not to lose an order.

None of the three, on their own, had the full picture. The figure is the starting point; the value comes when it becomes the opportunity to bring around a table the people who can act.

In every colleague, there is a person.

There is one last aspect of the modern car that I find significant. Many recent cars recognise the signs of driver fatigue and suggest a break. The system doesn’t only look at the machine: it also takes account of the person behind the wheel.

If people are the great asset of every company, it is essential to understand what holds them back in their work too: an excessive workload at certain times, a tool that isn’t quite fit for purpose, information that always arrives late, sometimes a difficulty that has little to do with work. These things never appear in any report, yet they weigh on results.

Picking up on them requires a connection that goes beyond the formal one between colleagues. This does not mean intruding on anyone’s private life. It means remembering that behind every box on the organisation chart there is someone with their own skills, concerns and ideas. In every colleague, there is a person.

One piece, one system.

This post is one of the pieces of the Rubik’s cube dedicated to the Administration face. The modern dashboard hasn’t done away with warning lights: they have become part of a system that provides an information service. In the same way, the administrative function keeps producing figures, but uses them, together with other relational skills, to connect people and make the whole work better.

In the next piece, we will look at how to rethink the organisation so that it serves the operational functions, starting with simple, jargon-free language.

Is your administrative department more of a warning light that comes on or a system that coordinates?

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Kenning Consulting accompanies small and medium-sized businesses in building a growth plan supported by management control tools tailored to their development stage.

However, there is one point worth exploring further. Passion originates within the individual, but it does not grow by itself. It needs an environment that recognises and nurtures it, and gives it a shared direction.

‘A man alone in command.’ With these words, radio commentator Mario Ferretti described Fausto Coppi’s breakaway on the Cuneo–Pinerolo stage of the 1949 Giro d’Italia. It is a powerful image that we still use today to describe a leader who makes decisions and acts alone. Yet even Coppi did not race alone: behind his victories lay teamwork that could not be seen during the race, and domestiques who supported him and brought him back to the front whenever needed. The same applies in business. The ‘man alone in command’ does not last long. And even the most capable person needs others to make a significant contribution to the group’s growth.

But what does it actually mean to feel part of an organisation? It means knowing that your work matters and that you are appreciated for the results you achieve. Grand gestures are not necessary. It is enough for a colleague in purchasing to know that their negotiation saved the margin on an order – and for someone to acknowledge it. This awareness is what builds team spirit among colleagues, and it is how the leader within each person finds room to emerge.

In SMEs, this atmosphere does not happen by chance. Business owners and management play different roles, both necessary, in building a collaborative and rewarding work environment. Business owners have a task that no one else can perform on their behalf: setting out a long-term vision and the values they believe in. Sharing these with their people strengthens cohesion, because it gives everyone a reason to move in the same direction.

It is the owner’s leadership style, not regulations or organisational charts, that spreads a sense of belonging throughout the company.

However, there is a limit that no pay policy can overcome. If the company’s most important goal boils down to the dividend, it is hard to share it as a team goal. Even if salaries are above average.

Salaries keep people. Values engage them.

A goal that speaks only to shareholders leaves everyone else watching the race from the roadside. By contrast, a shared vision places a piece of the common result in the hands of every employee. That is when individual passion – the kind Giovanni Ernani spoke of – stops being a private matter and becomes energy for the whole group.

This piece is part of the sixth face of the Rubik’s cube, dedicated to leadership: a concept that delivers the best results when it is not concentrated in a single person.

In the next piece, we will see why good organisations have not just one leader but many, and what contribution management – starting with the CFO – can make to spreading a positive working climate.

Do the people in your company know how much their work matters to everyone’s results?

Share your thoughts with us, and follow me on LinkedIn @Pietro Cavalli so you don’t miss the next piece of the journey. Kenning Consulting accompanies small and medium-sized businesses in building a growth plan supported by management control tools tailored to their development stage.

More than a data archive

Many SMEs see their management software as a large archive: the place where orders, invoices and stock movements are recorded. While this view is logical, it is reductive.

The value of an ERP lies not in the data it holds, but in its ability to make that data flow. It gains value when it integrates data and operational processes into a coherent flow involving every business function: production, logistics, human resources, management control and finance. None is left out.

If one area remains isolated, relying on its own spreadsheet or separate application, the flow is broken. It will then have to be pieced back together manually, which takes longer and increases the risk of error. The company’s nervous system

I like to think of the information system as the company’s nervous system. Data represents the signals travelling from one part of the organisation to another. People, with their expertise, act as centres that transform these signals into information and decisions.

However, a nervous system’s capability does not depend on the volume of signals it carries, but on the quality of the connections. Much like synapses, connections within a company strengthen and improve with use. When they are secure and verified, colleagues learn to trust data produced by another function, using it for decision-making without needing to double-check it every time.

This is why an ERP system must meet the needs of its daily users. And those needs do not stand still: they change with the market, customers and products. An information system that fails to adapt will end up describing a company that no longer exists. As we saw in the case described in the previous piece, the cost-centre structure was still tied to an obsolete production model.

Three factors that build integration

Integration is not something that can simply be purchased alongside the software licence. It is a complex process achieved over time through three key factors of business management.

The first is the coordination of all personnel. Each function feeds the system with data that will be used by others, so if the person entering the data does not understand its purpose or how it will be used, the connection will remain weak.

The second is the ability to manage change. The market demands new products, channels and metrics, and the information system must keep pace without becoming an obstacle.

The third is application compatibility. An ERP system rarely operates in isolation and must communicate with the other tools in use, in a secure and proven way.

A new connection is worth more than an additional data point

Let’s go back for a moment to the case from the previous piece. The richer product master data in the new ERP – costs, weight, volume, warehouse location – was not just an additional collection of information. It represented a new connection between the warehouse, logistics and management control. That connection generated transport savings of around €100,000 a year, which subsequently grew alongside the company’s revenue.

The value lay not in the data itself, but in the fact that someone could use it where it was needed.

This is one of the pieces of the Rubik’s cube dedicated to the Information System. An ERP system becomes a strategic asset when it stops being merely an archive and becomes the company’s nervous system: a network of reliable connections that grows alongside its people and the market.

In the next piece, we will look at how to assess the ERP system and vendor best suited to an SME, bearing in mind that while technical specifications are important, the relationship-building skills of the software provider’s consultants are even more so.

In the meantime, tell us: in your company, is the management software more of an archive or a nervous system?

Follow us on LinkedIn @Pietro Cavalli so you don’t miss the next piece of the journey.

Kenning Consulting accompanies small and medium-sized businesses in building a growth plan supported by management control tools tailored to their development stage.

And we established a first rule: understand the company’s operational processes in order to identify their legal implications. The practical question remains: where do you begin?

Two ways to approach the law In practice, an SME has two approaches available to it.

The first starts with the law. A specialist is hired to examine the regulations, translate them into a list of compliance requirements and verify that the company meets them. The result is a list of boxes to tick and a file of documents demonstrating compliance.

The second approach starts with the company itself. Its transformation processes (purchasing, warehousing, production and sales) are analysed, and a detailed assessment is carried out to examine the risks the business faces at each stage. The regulations come into play later, as one of the criteria used to define the contours of the overall risk.

The first approach is faster and offers a sense of security. However, it answers a different question to the one that truly matters to the business owner.

The right question

It is always an advantage to work with a business owner who asks me: ‘What risks do I face if I don’t comply?’

It is the right question, because it shifts the focus from documentation to actual business management. And the correct answer requires the second approach, because the sanctions a company is exposed to are only part of the risks.

Beyond the fine itself, there are consequences that no checklist highlights:

• operational stoppages or slowdowns;
• contractual penalties and claims for damages from clients or suppliers;
• the loss of certifications, authorisations or approved-supplier status with clients;
• reputational damage, which is very slow to repair;
• management time taken up by dealing with the unexpected.

A list of compliance requirements tells you whether the company is compliant. A process assessment, however, reveals the cost of non-compliance and identifies which areas of management are at risk.

A practical example: the raw materials warehouse

Imagine a company that manufactures tablets on behalf of third parties. A checklist would verify that the raw materials warehouse maintains a temperature log and that it is filled out regularly. Box ticked.

However, process analysis raises different questions. Who reviews the recorded data, and how often? What happens if a batch of raw materials is stored outside the specified conditions but is sent to production anyway? How does the client contract allocate liability in the event of a product recall? And does the supplier contract allow recourse against the supplier?

In this scenario, the regulatory fine is likely to be the least significant cost. Batch recalls, the loss of the client and litigation weigh far more heavily. This is precisely where a company that understands its processes will already have built in safeguards.

One piece, not an isolated chapter

This topic belongs to the side of the Rubik’s cube dedicated to the Legal Service: one of the six major areas that make up sound SME administration.

Starting with processes does not mean ignoring regulations, but giving them their proper place: a tool for reading management risks, not a list to be filed away. In the next post, we will examine the regulatory requirements that truly impact business management, and how to identify them starting from the processes.

When you think about your company’s compliance, do you start with the law or with your processes? Leave us your comments, and follow us on LinkedIn @Pietro Cavalli so you don’t miss the next piece of the journey.

A strong banking relationship is not built at the annual credit review. It is built day by day, through open, continuous and transparent communication, with the aim of establishing long-term trust.

Why should I worry about communicating with the bank every day if the credit review happens only once a year?

Because the annual review is merely the moment the company stands in front of the mirror. Yet that image is the sum of everything that happened beforehand. You cannot fix in a single day what you neglect when no one is watching.

Transparency is the first element that determines the quality of this relationship. Communicating accurate, up-to-date data – even when it reveals difficulties – keeps the image clear. A company that hides a problem does not eliminate it; it merely postpones it. The bank will find out anyway, but later, with less room for manoeuvre to act together.

The second element is the continuity of communication. A company that only makes contact when it needs credit sends a clear, albeit unintentional, signal to the bank: the relationship exists solely for the sake of the request. Conversely, a company that keeps the bank informed even when it is not asking for anything builds a relationship that holds up better when a request is actually made.

The third element is adherence to agreed rules: timelines, covenants and signed commitments. Honouring them consistently is what lends credibility to everything else, as it shifts the banker’s assessment from words to behaviour repeated over time.

We touched on this a few weeks ago regarding corporate financial literacy: when a private equity consultant evaluates a target company, they often seek information from the very bank that handles its accounts. If the banker gives a precise answer – demonstrating a thorough understanding of the company and its management – the perceived value will be higher than the financial statements alone would suggest.

That precise answer does not happen by chance. It is the reflection of a relationship built day by day, not one patched up at the last minute like a detail to be fixed in front of the mirror.

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Kenning Consulting accompanies small and medium-sized businesses in building a growth plan supported by management control tools tailored to their development stage.

In people’s growth, it is adults who guide the development of the young and care for the elderly. Parents occupy a specific position in this cycle: they stand in the middle, between those they have raised and those who raised them, and for a stretch of the journey they are the point of reference for both.

In business, that role is taken on by the entrepreneur. But there is one important difference compared to the family: the sooner the entrepreneur manages to involve other people to accompany them in this task, the better it is for the company they must lead. A business that relies on a single person remains as fragile as a family without a support network.

What only an entrepreneur can do.

There are decisions that, by their very nature, rest with the person leading the business. Choosing the right team members – the right people, even before the right roles. Establishing the founding principles and values that govern the business, the framework within which all other decisions make sense. And as far as finance is concerned, establishing that the resources to fuel the business are generated through ordinary operations – not through extraordinary transactions, but through well-executed daily work.

This is the part of the cycle that resembles parents laying the foundations: principles, security, the certainty that the resources for growth are earned, not found.

What the rest of the team must do.

A company does not grow solely on the entrepreneur’s decisions. It grows when it can rely on a team that works to increase the organisation’s knowledge base, makes the most of delegation processes rather than viewing them as the privilege of a few, and maintains an efficient organisational structure – capable of bearing the weight of growth without crumbling.

It is the same transition that takes place in families when children, having become adults, begin to make their own contribution: they do not replace their parents, but share with them the responsibility of keeping the system running.

Because growth requires a plan.

Here we see the difference between growth that simply happens and growth that is managed. Nobody grows up well by chance: there is always an intention behind it – on the part of parents, teachers, or those who accompany them. Similarly, no business grows healthily unless that growth is supported by a plan: clearly defined objectives, resources allocated coherently, realistic timelines and tools that make it possible to verify the results achieved at regular intervals.

I often use the compass metaphor to talk about management control. It is not the compass that steers the boat in the captain’s place – that remains the task of the entrepreneur and their team. But sailing without a compass, especially during the most delicate stages of growth, means relying on luck. The plan is the course. Management control is the tool that tells you whether you are following it.

Companies that grow in a balanced way are not those that rely on the intuition of a single key figure, nor those that keep chasing events. They are those that, like a family that accompanies its children’s growth with care and intention, give themselves a plan – and use the figures to verify, step by step, that they are on the right path.

This is the second piece dedicated to the ‘Management Control’ side of the Rubik’s cube: following on from J. Harrington’s model for mapping activities, here is another piece to help measure results and make better decisions.

Is your company’s growth supported by a plan – or is it chased from stage to stage?

Would you like to receive these bite-sized insights directly? Follow us on LinkedIn @Pietro Cavalli so you don’t miss a single piece of the journey. Kenning Consulting accompanies small and medium-sized businesses in building a growth plan supported by management control tools tailored to their development stage.

For the administrative function to contribute fully to business management, a broader perspective is required, extending to operational functions, the colleagues who deal with customers and suppliers daily, and the company's actual dynamics. This does not mean doing others' jobs, but rather understanding them well enough to provide effective support through appropriate services.

Starting with people. Improving the administrative function does not begin with processes. It begins with the professional growth of the people who make up the team.

Helping administrative staff understand what really happens in operational functions, such as how a sales proposal is created, the friction that arises with suppliers or the issues that hold up a delivery, is an investment that pays off directly. A person with this level of understanding can spot problems sooner, propose better-suited solutions, and become a credible point of contact for colleagues across the entire company.

Formal training courses are not necessary. Often, structured discussion, short-term job rotations or simply dedicating time to listening to those who serve customers and drive revenue growth is all that is needed.

The shared calendar is a simple tool with profound effects. One of the most effective practical changes, yet one that is too rarely adopted, is using a shared calendar for priority tasks.

When administrative office deadlines are visible to everyone on the team, not just those directly involved, three things happen: Stress decreases as urgent matters are minimised or eliminated, and tasks can be managed in good time rather than arriving as last-minute surprises.

Coordination improves because those responsible for providing documents, data or information know what is required in advance and can plan accordingly.

The environment becomes more open to listening. This is perhaps the least obvious benefit, yet the most important. An administrative office that is not constantly in 'crisis mode' has the mental capacity and time to listen to colleagues' requests, understand their needs and provide helpful responses. An office that is always rushing lacks this capacity, regardless of people's good intentions.

The result is greater collaboration and added value. Combining people who are more aware of the business context with a calendar that makes priorities visible yields a tangible result in daily operations: better collaboration with operational functions — the teams focused on generating revenue and profit.

This is not a vague outcome. It manifests as more effective meetings, timely information delivery, problems resolved before they incur costs and decisions based on more comprehensive data.

The administrative function does not change its role; rather, it expands it. While it continues to oversee deadlines and data accuracy, it also serves as a point of reference for the entire organisation, not just for those who need to sign a document.

One piece, one system. This content is one of the Rubik's Cube pieces dedicated to the 'Administration' face — the one focused on organising the function to free up time and create value. As with every piece, the goal is not to add complexity, but to remove friction, making office work smoother and better connected to the rest of the company to enable growth.

Do you already have a shared calendar for your administrative office's deadlines? Follow us on LinkedIn or subscribe to the Kenning Consulting blog to continue building the system, one piece at a time.

Three players, three different expectations

In an ERP project, there are at least three stakeholders whose objectives are not always clearly stated or coincidental.

The entrepreneur or CEO who has decided to make the investment, taking on board the Administrative Director's arguments, expects improved management, and when an unexpected event occurs, the instinctive reaction is, “How could you not have foreseen this?”

Users are the key people in the project, but their support must be won due to the natural aversion to change that affects established habits. The new system requires additional training and often involves consolidating tasks previously distributed across different departments—a workload that, for those affected, is perceived as a disadvantage to the benefit of others.

Finally, the supplier plays a strategic role because, in addition to installing the product, they must work with the project manager to find solutions that will deliver future results. Some manage this relationship collaboratively, while others prefer a more formal approach, with a detailed contract, drafts of project progress exchanged before the final version, and signed test reports. Neither approach is absolutely right or wrong, but formalism has a certain cost with few concrete benefits, while collaboration helps prevent unexpected events—and resolve them quickly when they do occur.

The unexpected is part of the project

A well-executed ERP project isn't one without surprises, but one in which the project manager knows how to transform the unexpected into opportunities. This is a skill beyond simply documenting tasks and deadlines: it's the willingness to manage the unpredictable.

A Practical Example: From an Emergency to an Integrated ERP

A concrete example. Years ago, IBM decided to abandon a solid and well-regarded product like ACG, which we had been using successfully for many years. This market decision by our longtime supplier prompted me to replace the management system with an ERP that would allow us to integrate the various applications in use, such as MRP, management control, and reporting, that were operating separately. The need to replace a single application became an opportunity to improve management efficiency and review all processes in an integrated manner, as well as update a procedure that had become obsolete over the years.

The Results: Qualitative Objectives and a Measurable ROI

The project had important but difficult-to-measure qualitative objectives, such as process simplification, improved workplace climate, and staff professional growth. There was also a specific quantitative objective, chosen from a significant cost item: distribution logistics.

The ERP's technical specifications allowed for more information thanks to the much richer product database (costs, weight, volume, warehouse location), which, when used appropriately, allowed for optimized transportation for deliveries to a customer category. The expected savings were approximately €100,000 per year, which then grew along with revenue. Dividing this amount by the net project cost of €390,000, the payback period was reduced to just 3.7 years.

Having this quantitative objective allowed me to offset an unexpected aspect, such as the increased time required to modify the cost center structure, which still referred to the old production model that no longer adhered to reality. That ERP, updated over the years, is still in use: the best proof that the project worked.

This is one of the pieces of the Rubik's Cube dedicated to the Information System. Technology is important, but how you engage people makes the difference between a project that simply provides users with a new tool and one that gives everyone involved the opportunity to be an active part of the change.

In the next Rubik's Cube piece, we'll look at how to choose the right ERP product and supplier for an SME. In the meantime, tell us: in your latest IT project, what was the most difficult obstacle to manage—technical or human?

Follow me on LinkedIn @Pietro Cavalli to stay up to date with upcoming episodes.

The underlying problem is that the law is seen as an obstacle.

SMEs often view regulatory compliance as an external constraint that diverts resources away from what they perceive as more important activities, such as production, sales, and customer service. While this approach is understandable, it is costly: whenever compliance is treated as a minor add-on to business management, applied only to avoid fines, the final bill is higher. The good news is that there is a practical alternative: a streamlined in-house legal service tailored to the real needs of small and medium-sized businesses. This approach brings tangible benefits without requiring a complex structure.

The first rule is to know your processes.

Everything starts here. A thorough understanding of a company’s operational processes is key to identifying the legal implications of its daily activities — not in theory, but in the practicalities of how it produces, purchases and sells. When a company invests time in this reconnaissance, it creates something that goes beyond mere formal compliance: a legal shield that protects it from many unexpected events, because risks are identified before they become problems.

A concrete example is the standard operational contract.

Let’s consider the people who deal with external parties on a daily basis — suppliers, customers and consultants. If these people have access to a standard ‘operational’ contract, written in clear and understandable language, which simply requires the variable details to be filled in, and which addresses the truly important points of the negotiation right from the beginning, the benefits are threefold:

• It allows for a good start, because the critical issues have already been defined upfront.
• It avoids the riskiest situation of all: accepting the other party’s requests without considering the real implications for the company, or knowing what to ask for in return.
• It prevents important points from being forgotten — points that tend to emerge when the negotiation is already at an advanced stage, where any change costs time, credibility and, often, money too.

It is a piece, not an isolated chapter.

This topic is part of the Legal Service face of the Rubik’s Cube, one of the six major areas that make up effective SME management.

As with every piece, the principle is not to accumulate obligations, but to develop a method that mitigates risk using simple, practical tools that can be managed without a complex internal legal structure. In the next article, we will delve into the specifics of how to build this agile, streamlined legal service step by step, without hiring an in-house lawyer.

Have you already adopted standard contracts for your business relationships, or does every negotiation start from scratch? Leave us your comments and follow us on LinkedIn @Pietro Cavalli so you don’t miss the next piece of the journey.

When a company spreads a financial culture within its organisation, it is not just improving a management process. It is also strengthening an intangible asset that contributes to its growth in value over time, with the added benefit of improving its relationship with banks.

This is an indispensable asset for any SME aiming for financial independence. Some entrepreneurs ask, “If the goal is to sustain the company through self-financing, why continue to invest time and energy in relationships with banks?”

Why nurture a relationship I could do without?

The answer lies in a mechanism that only becomes clear in the long term: only companies with a solid financial structure and healthy finances have a balanced and lasting relationship with credit institutions. Companies with excessive debt, on the other hand, pose a risk that limits their ability to fulfil their obligations — and this inevitably affects their relationship with their bank.

A useful analogy is that a bank treats a company like an investor buying a bond. The bank expects two things: periodic interest payments and the return of the principal at maturity.

If the company achieves its earnings targets, this demonstrates its ability to manage its operations, just as a low-volatility stock signals a low risk profile. Debt, by definition, has a beginning and an end: companies that respect this principle present themselves to the bank as low financial risk, according to the same criteria that the bank applies to its own supplier/client relationships.

What happens when debt is continuously renewed?

The flip side of the coin is equally clear. When excessive debt pushes risk to the point of jeopardising regular interest and principal payments at agreed maturities, the relationship with the bank suffers.

To understand the significance of this shift, it is worth revisiting the bond example. What would happen if a company, unable to repay the principal at maturity, asked investors to renew their investment, perhaps promising a higher interest rate? The investor would effectively lose autonomy. Moreover, there is no guarantee that the higher return would compensate for this loss of autonomy.

The same thing happens to the bank: while it remains an external lender remunerated at a fixed rate, it loses its negotiating autonomy. While it can raise the agreed rate, it cannot change the nature of the contractual relationship that binds it to the company. Of course, companies are not bonds — the variables involved in management are much greater, and the results are much more uncertain. For this reason, a continuous and constant flow of information with the bank is not just an option, it is an integral part of the relationship.

The Impact Beyond the Bank

One important point that often goes unnoticed is that when a company becomes the subject of a sale negotiation or investment by an entrepreneur, the entrepreneur will always rely on a private equity advisor.

A company that rigorously applies the supplier/client logic to its banking relationship is highly regarded by the bank. This consideration extends well beyond the bilateral relationship to potential investors and their advisors.

Every investor relies on a financial advisor during the acquisition negotiation phase, and this support continues until the final payment is made. One detail that many entrepreneurs overlook is that financial advisors working in private equity have a banking background and use their contacts in the credit system to gather information on the target company.

If the banker interviewed can provide precise answers because they truly know the company and its sound financial management, the company will be perceived as having a higher value than that emerging from financial statements or public information. However, if the banker is unable to answer precisely and remains vague, the assessment will be more limited and the company will be penalised.

The bottom line

A widespread financial culture doesn’t just produce better numbers; it also influences management decisions by increasing the entrepreneur’s ability to interact with other stakeholders and encouraging collaborators to consider the economic and financial aspects of every decision. It builds a reputation for the company, even when the entrepreneur isn’t present — during due diligence, sales negotiations or evaluations that also depend on what the bank says or doesn’t say.

Developing this culture isn’t a formal exercise; it’s one of the most profitable and least noticed investments a small or medium-sized business can make.

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I have seen small and medium-sized businesses double their revenue in eight years without updating the organisational chart. This is not due to forgetfulness, but to prudence. Moving someone means renegotiating balances between partners, altering informal hierarchies and offending established sensibilities. It’s easier to avoid changes.

The problem is that a structure which doesn’t evolve alongside the company becomes a hindrance. Inefficiencies silently accumulate. Responsibilities overlap. Decisions take longer than necessary.

However, there is a way to approach the organisation that does not feel like a trial to those involved. It’s called Process Value Analysis and can be applied to the system by H. James Harrington, who described it in his work, Business Process Improvement (1991).

Harrington and Process Value Analysis

James Harrington was among the first to argue that improving business efficiency does not involve directly intervening with people, but rather with the processes in which they work. His insight was simple yet powerful: before reorganising who does what, it is essential to understand which activities create value and which do not.

The model classifies all a company’s activities into three categories:

RVA (Real Value Added): activities for which the customer pays. These activities directly relate to what the customer purchases, such as manufacturing, providing the service and delivery. Any activity that does not contribute to this goal may be reviewed. BVA (Business Value Added): activities that are necessary for the company’s operation but which are not perceived as having direct value by the customer. These include accounting, regulatory compliance, internal controls and payroll management. These activities are essential but must be streamlined. NVA (No Value Added): activities that add no value to either the customer or the company. Examples include waiting, duplication, redundant checks, avoidable error corrections and unnecessary movement of information or materials. These must be eliminated.

The strength of the model lies in the fact that the analysis focuses on activities rather than people. No one is evaluated. The process is improved.

Four steps to applying it in an SME

The implementation process does not require external consultants or specialised software. It requires time, a methodical approach, and a willingness to question what is usually taken for granted.

1. Map the value chain. Start by identifying the company’s main processes, from customer order to delivery and from supplier purchasing to payment. A perfect diagram isn’t necessary. A list of the activities that make up each process, in the order in which they occur, is sufficient.
2. Classify each activity. Ask Harrington’s question of each activity on the list: would the customer pay for this if they knew about it? If so, it is an RVA. If it is necessary for the company, but the customer does not see it, then it is a BVA. If it is neither, it is NVA.
3. Quantify the weight of each category. Once the activities have been classified, estimate the time or cost absorbed by each category. In some companies that I have analysed, NVA activities range from 20% to 40% of operating time. When this data is presented objectively to management, it has an immediate impact.
4. Plan improvement actions. NVAs should be eliminated. BVAs should be optimised, and automated where possible and cost-effective. RVAs should be protected and expanded. At this stage, the analysis becomes a reorganisation project, based not on hierarchies but on value streams.

The administrative manager plays a key role in this analysis

In an SME, the administrative manager is often best placed to carry out this analysis. This is not because they are process experts, but because they have something no other manager has: cross-departmental visibility, enabling them to intervene impartially.

They can make a significant contribution, especially in processes that connect different departments or functions. They know how to intervene in the information system to improve the use of this often-undervalued resource.

With the Harrington model, this becomes a tool. The administrative manager can document and classify activities and present them to management, showing where value is being created and wasted using data.

This approach has an additional advantage in that it depersonalises the discussion. When reorganisation is proposed based on a process analysis, resistance to change is reduced. It’s not about saying, “Mario works poorly.” It’s about stating that “this process accounts for 35% of activities with no added value”.

A shift in perspective that produces concrete results

Process Value Analysis is not a magic tool. It’s a method of seeing more clearly how a company transforms its resources into value.

When applied seriously by an SME, the results are tangible. Processes are simplified. Responsibilities are distributed more consistently in line with actual workload. Performance evaluations improve. The formal organisation reflects the actual organisation.

Often, what seemed like a people problem turns out to be a design problem. It’s a problem with a solution.

The Rubik’s Cube of administration has a solution. This is one of its pieces.

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Kenning Consulting supports small and medium-sized businesses in strengthening their administrative function and implementing practical management control tools tailored to their needs.

What I’m proposing — an administration that performs management control, maps processes, supports operational functions and builds relationships with banks using structured data — seems to require skills that exist in much larger, more structured companies.

The answer is no.

The reason is simple: in an SME, multitasking isn’t a limitation. It’s the model.

The Specialist Paradox

Imagine we want to fill all the value-added roles in a structured company: controller, risk manager, financial planner, legal representative and a management consultant. Five roles. Five salaries. Five people to coordinate.

For a small to medium-sized enterprise (SME) with 20–50 employees, this option is not only expensive, but also unsustainable. Those five people could not work full time, and the organisation would end up with more problems than it set out to solve.

Yet the need for those skills exists. Data is needed. Analysis is needed. Risk management is needed. A financial plan is needed.

So how do we resolve this paradox?

The AM as a Point of Integration

An SME’s Administrative Manager (AM) cannot be just the head of one important function. Due to their position and access to information, they have the most comprehensive view of the company.

Sales data, personnel costs, supplier invoices, the financial situation and credit trends all pass through their desk. No other function has this comprehensive perspective. No other function is so naturally positioned to connect the various points on the map.

This is the starting point. The aim is not to turn the AM into a super-specialist. It’s about helping them utilise their existing resources — data, access and vision — to provide the company with something it wouldn’t otherwise have: an internal navigation system.

I often use the metaphor of a compass. Management control is like a compass: it doesn’t take the place of the captain in guiding the boat, but navigating without it relies on luck. The AM is the person who holds and interprets the compass. They do this by experiencing the boat firsthand.

What changes in practice

Three concrete changes occur when the AM broadens their focus.

1. From data to service. The information that the administration department collects every day ceases to be a passive archive and becomes a working tool for colleagues in other departments. The sales manager can see which customers have the greatest impact on working capital. The production manager understands how costs translate into margins. People work with greater awareness.

2. From reacting to forecasting. An administrator who simply records what has already happened is always playing catch-up. When they regularly analyse data — even in a simple way, without sophisticated tools — they begin to see warning signs before they become problems. This is the value of planning, even in its most basic form.

3. From cost to performance. Administration is often perceived as a pure cost centre. However, when it starts to produce useful information, improve processes and reduce inefficiencies, its perceived value within the company increases. It becomes a function that generates results and supports growth.

The necessary condition

There is, however, a necessary condition that doesn’t concern tools, but people.

The AM must have the time to do this work. Time can’t be created out of thin air — it must be freed up. This can be achieved by mapping and optimising administrative processes, delegating routine tasks to team members, and using a shared deadline calendar to reduce peaks and avoid last-minute rushes.

In other words, we need to change our priorities and focus on those who are committed to generating revenue, which creates income and cash flow. This shift in perspective requires a well-organised administration department to provide valuable services.

This is the order I always recommend when guiding an SME through this process. It doesn’t start with management control. It starts with organising the function. An AM who is overwhelmed by obligations doesn’t have the mental space to conduct analysis, so it’s pointless to ask him/her to do so.

A valuable role

In the SMEs I follow, when this change of perspective occurs, the benefits are not confined to the administrative office. They spread. The other functions work better. Decisions become more data-driven and less intuitive. The entrepreneur has an internal point of strategic reference.

This is not an immediate process. It requires time, a methodical approach, and a willingness to question established practices. However, it is a path that SMEs can follow, and when executed effectively, it can transform the quality of company management in a lasting way.

The AM does not have to become a superhero. They must understand what operations staff need to do to work better and translate that into revenue and cash flow.

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Kenning Consulting supports small and medium-sized businesses in strengthening their administrative function and introducing practical management control tools adapted to their real needs.

And, like solving a Rubik’s Cube, it doesn’t require genius; it just requires the right method.

The criterion that changed my way of working The criterion that I followed, and which allowed me to achieve excellent results during many years of working in SMEs, was to be guided by internal customer service. This means providing services to everyone along the company’s value chain, from production to sales and from logistics to management.

I was lucky to begin my professional journey as a controller with an enlightened entrepreneur like @Giordano Bruni, who made me realise the advantages of embedding this criterion in my professional DNA. This had a profound influence on my administrative work, pushing me to adopt a simple communication code free of accounting and tax technicalities.

This is not to say that the technical aspects don’t matter — they do. It’s just that those who work in production, sales or logistics don’t need accountant language; they need clear information to take good decisions. And if that communication code is the prevailing one, it ends up influencing the way you express yourself.

From complexity to order: the Rubik’s Cube

I use the metaphor of a Rubik’s Cube to describe this journey. At first glance, it may seem chaotic — 54 tiles of six different colours in seemingly random positions. But with the right method, each tile finds its place. The end result is an orderly, coherent and functional system.

The administration function of an SME works in exactly the same way. There are many issues, but if you approach them with the right criterion, they all find their place in a coordinated whole. 54 weeks, 54 tips, a complete system

Starting this week, I’m launching a weekly publication programme: 54 tips for good SME administration, one for each tile of the cube.

The six faces correspond to the six major themes:

1. Administration — reviewing the function to free up time and create value
2. Management control — measuring performance to improve decision-making
3. Financial management — managing invested capital to ensure sustainable growth
4. Legal services — reducing risk with straightforward, practical tools
5. Information systems — using data as a strategic lever
6. Leadership — driving change with method and motivation

The content will be published every Wednesday on LinkedIn. Every Monday, it will be explored in more detail on the Kenning Consulting blog.

My experience confirms that, when everyone involved in management uses the value creation criterion as a point of reference, it supports a path of balanced, profitable and sustainable growth.

The Rubik’s Cube can be solved. Let’s get started!

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The sharp increase in the purchase costs of raw materials and finished products, as well as the supply cut-off of some comodities have different and competing causes. The proximity in time with of these developments, marks an increasingly discontinuous and turbulent environment, which has put the production systems of many countries under great strain.

What measures can be taken to deal with these global events ? If, due to the magnitude and frequency, it is not possible to completely eliminate the negative effects of such events, every company, even small ones, must take action to better manage its operational levers. To this end, risk assessment is of strategic importance in business management in order to identify the appropriate measures to be taken when a harmful event occurs. It is also good management practice for a SME which, in order to have practical solutions that can be applied quickly, needs to analyse its transformation processes in detail to understand where and how to intervene. This evaluation may start with an analysis of the production process with the aim of identifying critical aspects that may hinder its smooth running. If the goal is to reduce risk, we might consider replacing overseas suppliers with domestic or European companies to reduce the overall cycle time of the supply chain and have more control over our trading partners. Every company must initiate a detailed analysis of its value chain as soon as possible in order to adequately prepare for the appropriate changes, which take a medium to long time. This is the only way our companies will be able to benefit from the strategic policy measures that the various EU countries are applying to remedy the distorting effects of a global economy caused by a lack of economic policy decisions.

In the short term, it is important to look at the production process as a whole, and avoid a partial evaluation that would take us far from the solution. Indeed, ignoring for the sake of simplicity the implications of ISO certification, transformation processes have at least two critical aspects to consider such as the quality of the components used and their integration and specialisation with plant and machinery. The soundness of the supplier is also an important feature, as is having a good supply contract to support the business relationship which binds the parties to the agreed conditions. These aspects have wider implications than just the purchase price, and should be examined before making changes in the transformation process by replacing a component.

If you would like more information on Kenning Consulting's project to improve your SME's supply chain click HERE and you will find useful tips that you can also apply yourself.