Keeping all the plates spinning

Managing a business in today’s environment is a complex affair – it has been likened to playing chess in the dark.

 

Particularly for the owners of SME’s it has never been harder to keep track of the various elements which are buffeting the business.

 

Now might be an appropriate time to run a check over those areas of the business most likely to cause problems in the coming months.

 

It is a self-evident truth that many a crisis could have been averted by timely intervention.

 

A clinical evaluation of all areas of risk and reward will identify areas of potential concern and most importantly the ways and means by which to address them.

 

The question that needs to be answered initially is – how much longer can I keep all those plates spinning?

 

Food price inflation - no let up for the foreseeable future

 

As affluent consumers in China and India demand a more Western style diet we are seeing the effects on the price of meat and other foodstuffs.

 

During the past year UK Food price inflation has seen the price for Meat rising by 5.4%, Fruit by 10.2% and Vegetables by 5.4%.

 

For 2014 the rate of food price inflation in the UK is forecast at 3.8%.

 

Food manufacturers are caught in a vice; the buying pattern for many continues to be “just in time” reflecting the need to keep inventories as low as possible.

 

However without the safeguard of a “buffer stock” they are now more than ever exposed to the harsh reality of having to “pay up” in order to secure the raw materials to keep their facilities in production.

 

At the same time suppliers will continue to face the problems of operating in the current economic background with buyers seeking to delay payment, renegotiate contracts etc.

 

The era of cheap food has long passed and with consumers still having to closely watch their expenditure companies will now more than ever be required to ensure they are operating at optimum efficiency.

 

The value in reviewing your business plan

As business practices change and external factors come into play a regular review of the company’s business plan will ensure that the company stays ahead of the game.

The review if done correctly should result a realistic, objective and clinical appraisal of the business.

Following an analysis of the business plan it should be easier to communicate objectives and strategies to those funding the operation and also to the company’s employees.

The review will serve as a reference point when determining the effects of alternative courses of action on business operations.

A clear assessment of current working practices should highlight areas where the company may require outside assistance.

An analysis of the current inventory levels and receivables will provide the answer to the future growth and capital requirements of the business.

 

 

 

Effectient Stock Control

 

For suppliers and manufacturing companies alike the efficient management of stock is a vital element of their business.

In many cases business failures can be traced back to the inability of a company to turn its stock back into cash within an acceptable time frame.

It is worth noting the costs associated with carrying stock:

Holding stock ties up working capital with otherwise could be used for other purposes therefore it has an opportunity cost.

All stock being held incurs storage costs such as rent and other utilities. Insurance especially for high value goods also is an expensive add-on.

If goods are being funded via a Bank overdraft or loan this may well inhibit the company’s ability to finance other activities as Banks are reluctant to extend terms.

There is always the danger that stock can become obsolescent or in the case of perishable products deteriorate and become a write off.

The only way to ensure that a company keeps track of this area of exposure is by constant monitoring of stock levels and focussing on unusual or irregular patterns in the movement of stock.

 

Everyman for himself

  

There is a growing pressure on suppliers to accept extended payment terms if they wish to retain the business.

 

Companies who previously had accepted 30 day payment terms are now requesting periods of up to 90 days.

 

Such terms can only be served by larger organisations with adequate cash reserves. For the small to medium supplier it further ratchets up the pressure at a time when banks are unwilling to increase their credit lines.

 

It has been general commercial practise for companies to try to stretch the length of their payment terms by all manner of means both fair and foul.

 

However as profit margins are further squeezed by increased operating costs the importance of maintaining cash flow is vital.

 

Business is hard-won in the current climate, but above all there has to be a commercial raison d’être for any transaction.

 

Mutual reciprocity has to be the basis for the Customer/Supplier relationship for it to remain worthwhile.

 

The person on the spot is baffled, whereas the onlooker sees clearly

 

 

Based upon my experience across a variety of sectors and businesses one observation holds true – whilst some companies are doomed to fail there are many whose survival and future profitability could be secured from a fresh input.

When you are personally involved it is not always easy to change direction or take appropriate remedial action.

Too often companies pursue to same strategies because they are fearful of embracing change. This inertia can have very damaging implications.

This is where an “outsider” can be of assistance – an objective appraisal can provide the solutions by which the company can move forward positively as opposed to drifting.

Managing in challenging times

 

Working with companies over the past months it is apparent that there is an increasing sense of demoralisation amongst many sectors of the work force.

 

The causes for this are readily identifiable, many people are struggling with their own domestic finances( latest figures from the UK’s Money Advice Service show 18% of Britons, 8.8 million people, consider they have "serious" financial issues),  whilst at the same time the need for increased levels of performance and efficiencies at work have rarely been as intense.

 

It is the responsibility of the management to ensure that during these times staff members are encouraged to give of their best.

 

Too many managers are remote from the day to day activities of their staff and appear to have the attitude that the people who report to them are lucky to have a job.

 

This mentality is counterproductive. Staff need motivating and incentives do not necessarily have to come solely in the form of financial rewards.

 

Some of the best run and therefore by definition most successful commercial entities are those where the workforce is engaged and feels part and parcel of the organisation rather than merely there to make up the numbers.