8 management
mistakes made by the management of companies in Bulgaria

Have you experienced the frustration of seeing your company make the same mistakes you thought could be avoided but need to know how?

Too often, businesses fight the same battles year after year and fail to keep up.

The situation can be illustrated by a well-known quote, copied by many from the famous physicist Albert Einstein: “It is madness to do the same thing over and over again and expect a different result.”

There are many reasons why businesses can suffer from inertia. Still, some mistakes are repeated even by the most prominent companies that have an expensive management team and are not amateurs at what they do. This happens because as the business grows, it becomes harder for management to sift out what brings profit or loss.

Although every company is unique, some mistakes are made frequently. The Balkan Services team summarized eight of the most common management mistakes companies make and ways they can be avoided:

1. “Uncleared” stock

One of the most common mistakes businesses make that leads to more serious problems later on is neglecting the accuracy of stock calculations.

This problem is a natural result of having two parallel systems (one for operations and one for accounting) that are generally unlinked.

Erroneous inventories, in turn, lead to differences in values and incorrect costing.

Lack of clarity on stock also provides a breeding ground for abuse, loss and theft.

It should be noted that a complete stock take takes time —months in some cases and years in others.

The end result of these efforts gives general management a clear picture of the entire business it manages.

2. Lack of control points

A classic problem reminiscent of the first mistake we told you about is the broken link between production, warehouse, and accounting. This situation is typical of manufacturing companies, but not only where the interconnection between departments is of particular importance but also where the processes between them are not built.

Another relevant example can be found in the food industry, where ingredients such as sugar or flour are used in bulk. If there is no control point to reconcile the quantity used in production with warehouse records, discrepancies can quickly accumulate.

Suppose a recipe calls for 1,000 kg of flour for a production batch, but due to measurement discrepancies, unspecified production fines or incorrect recording, more flour is used without proper documentation. Without systematic control or reconciliation, the system may indicate that the company has a certain quantity in stock when stock is depleted. This discrepancy can lead to unexpected production stoppages, missed deliveries or increased costs as emergency raw material purchases are made at higher prices.

A lack of real insight into how production and stock levels affect each order can also be problematic. In such a situation, a large order that the company is convinced is concluded at a reasonable price may result in a loss.

Read more: How ERP software is revolutionising pig farming at Boni Holding

3. What is the cost price?

A lack of understanding of how costs are calculated often leads companies to a situation where more revenue brings more loss. This is because, with illusory costing, the realization of output is not covered by revenue.

We will illustrate this statement with the following example: an alcohol company that needs to calculate the cost of its various products correctly comes to the wrong conclusion that by selling more of a cheaper alcohol, it makes a larger margin. At one point, the finance department thinks the company is running at a loss, leading to a confrontation with the sales department, which in turn thinks it has made many good deals.

The problem here is very clear – if cost had been correctly calculated, the deals would indeed have been profitable, and the financial result would have been positive.  

The lower the percentage of direct costs, the greater the distortions. And practice shows that direct material costs are among the smallest for businesses.

Another point where cost affects is the redistribution of discounts because they are given on a basis. If a company does not calculate its cost of production correctly, it may operate as if it has a margin on which to discount when, in reality, it does not.

4. Ignorance of company processes

The business analyses that start the implementation of any system, including ERP software, show that company processes are rarely clear enough.

This problem becomes apparent when consultants start gathering information from all levels. At this stage, management realizes the many exceptions and ramifications in business processes.

End-to-end business management software eliminates these problems because it details the processes and their specifics. ERP platforms allow processes to be channelized to better manage the business.

It is important to note that such a system is not a magic solution. If a company has a “broken” process, it is necessary to first correct the process itself.

Read more: Everything you need to know about ERP systems

5. The human factor in calculations

The lack of a certain standard can explain why the formulas behind certain calculations in the same company differ.

This is because people calculate in the easiest way for them, and sometimes, they do not know how to calculate a certain metric. When software is missing, this is easily concealed.

The problem manifests itself most vividly when exceptions in the process have to be accounted for, for example when calculating the yield per machine.

The specific metrics are calculated correctly when people start to reason over the exceptions, which are often subjective.

6. Management is overloaded

Bulgarian business is relatively young—only 34 years old. The lack of generational knowledge and skills is seriously reflected in companies where senior management is too busy and has no time to pay attention to details.

In a fast-paced business environment, managers often wear too many hats, leading to overwork, missed details, and poor decision-making. This problem is particularly evident in companies where the senior management team is responsible for everything from strategic planning to overseeing day-to-day operations.

Take the example of a mid-sized manufacturing company where the CEO is involved in everything from approving supplier contracts to troubleshooting production problems. While this hands-on approach can be helpful in small companies, it quickly becomes unsustainable as the company grows. The CEO’s time becomes scarce, leaving critical tasks either delayed or completed with less attention to detail. This hinders growth and leads to a need for proper delegation and empowerment among middle management.

A similar situation can be seen in family businesses, where founders are often reluctant to delegate critical responsibilities, fearing that others may not meet their standards. This leads to micromanagement and bottlenecks where decisions are delayed, and operational efficiency is compromised.

Implementing an ERP system can help by automating routine tasks, providing real-time data, and enabling better department visibility. This reduces the burden on senior management, allowing them to focus on strategic initiatives that move the company forward.

Additionally, defining clear roles and responsibilities through an ERP system helps establish effective communication channels and fosters a culture of delegation, which reduces senior management overload.

ERP systems are beneficial as they ‘shine a light’ on points in staff processes that otherwise remain hidden from management. The software often “breaks down” managers’ firm belief that employees work according to their instructions.

For example, by giving discounts in the same way, which doesn’t happen by empowering middle management and leveraging technology, companies can ensure that their leadership stays focused on the bigger picture, enabling sustainable growth and improved operational efficiency.

7. Unrealistic expectations of software systems

Generally, companies are looking for a system to automatically solve their problems, but don’t realize they need to “clean up” their business processes first.

Take, for example, the logistics data of a shipment and the rules of the freight forwarders or courier companies for their packaging and transportation. This information cannot be clear without being preset in the system. In this case, in order to automatically generate a bill of lading based on the number of shipments, it is important to specify clear rules for how they are to be allocated to boxes.

This is where the consultants’ role takes the lead. It is important that these professionals have the knowledge and skills to step into management’s shoes and that the software’s implementation is successful.

8. The role of the accountant should be a controlling one

Accountants must remember that their roles are control functions, not data entry.

In our experience, after implementing an ERP solution, accountants sometimes find it challenging to transition from their current work to the new system. The change requires accountants to become comfortable with the entire process and learn the relationships between modules and accounting records.

This way, they can ensure that all the documents prepared by other employees in different departments are correct.

Our experience shows that to make this process as easy as possible, it is essential to train people in a direction that allows them to accept change.

The key to a successful ERP system implementation: Participation of management

To ensure a successful ERP implementation, management must play a central role. It is critical that company management stands firmly behind the decision to change the system and is prepared to make difficult decisions when necessary.

Company executives looking at ERP system change must understand that ERP system implementation is not something a consulting firm can do alone—business transformation requires commitment from both parties.

Something that is overlooked but essential is to appoint an internal project manager who can help synchronize internal teams, ensure that meetings are productive and align requirements.

The commitment and leadership of the company during the implementation process, as well as keeping employees informed about how the changes will improve their performance, are critical ingredients to making an ERP system work, benefit the business, and help grow the company.

Read more: Viplast AD optimizes its production with Soft1 ERP cloud software [case study]

No business today can grow and be competitive without the use of IT systems. Choosing the right software solution and implementing it is a complex, difficult but critically important decision.

At Balkan Services we have expert knowledge of business, technology, and legislation, and we speak all three languages. We will listen carefully and advise you on choosing the right business system for your needs.

Balkan Services подкрепя бизнесите по пътя им към дигитална трансформация от 2Balkan Services has been supporting businesses on their digital transformation journey since 2006. We have already helped over 270 companies to digitalize their business by implementing well-established software solutions and IT infrastructure management.