Where's the money gone?

Particularly in these difficult times, it is staggering that so many companies be they large or small fail to keep a control of their inventories. Whilst Management consistently push for increased sales performance, the question of housekeeping is often put on the back burner or it would appear totally neglected.

This laissez faire attitude is in evidence across the board, recently the National Audit Office having investigated the UK Ministry of Defence flagged up a lack of evidence about the existence and value of some £6.3bn of assets - including £752m of military equipment, which includes firearms and £184m of Bowman radios. The scale of this ineptitude beggars belief.

As far back as 2008-9, auditors had raised concerns about inventory accounts and warehouse systems and checks had been improved, but they had found that the inventory recorded did not match the stock count at 29% of locations. 

This begs the question: how comfortable are you with your Stock and Debtors controls?

 It might be timely to conduct a pre-emptive review of your operating systems now rather than wait for the post mortem results.  

It seemed like a good idea at the time

All current economic data underscores the fact that the last quarter of 2011 is going to be a difficult time for all. As domestic budgets are ever more squeezed this will impact on businesses across the board.

The recent meeting of US Bankers at the Jackson Hole Summit concluded that debt problems facing advanced economies were even worse than previously thought and that even the drastic action taken so far to reduce the debt mountain may not be sufficient to head off another wave of crisis in the global banking world.

At the same time The European Commission continue their battle to stave off further crisis in the Euro zone as the risk of debt contagion spreads.

There has rarely been a more crucial time to conduct a root and branch analysis of your business. Undoubtedly there are areas which would benefit from some radical adjustments/ change of direction. The consequence is not acting now could have very negative effects in the next few months.

Now is the opportunity to prepare for increasingly difficult times rather than adopting an ostrich “head in the sand” approach.

When trying to explain a disastrous strategy to your Shareholders or Bankers it will serve little purpose to trot out the well worn defence “it seemed like a good idea at the time”. 

Fiddling whilst Rome burns?

How often do we ignore the obvious and subsequently ask ourselves “why did that go wrong?”

A large number of companies fail to address problem issues early enough to avoid an oncoming crisis.

The signs of a troubled business are all too apparent – these include lack of controls, lack of strategic vision, a demotivated workforce and obsolete or valueless stocks etc

Instead of grasping these nettles, often the preferred option is to engage in a totally pointless exercise such as a rebranding campaign or the launch of another product range destined to fail for the above reasons.

The operating style of many doomed companies can be likened to Nero’s pastime of fiddling whilst Rome burns.

Managing in troubled times

Working with companies over the past months I have noticed 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 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.       

Are you postioned for the Stress Test

Following the weekend announcement from IMF Chief Christine Lagarde that although the global lender can meet its current obligations this could change if the crisis worsens are heightening concerns that more European Banks are in danger of failing the stress test.

This comes as a timely reminder that all businesses operating in today’s climate need to have constant and rigorous focus on their commercial exposure.

Against the current competitive background it is very difficult to contemplate turning away business especially from a customer of long standing. Many times however, the best business is that which is left to competitors.

It may well be that turnover suffers when stricter controls are in place over such elements as payment terms and credit limits.

However, the reward for such fiscal discipline is obvious. Avoiding defaults by customers not only protects the company’s bottom line but considerably reduces the stress in your own life!

Time to lift a few stones?

Events of the past week have shown just how vital it is that Senior Management set clear defined operational and reporting procedures.

In many companies the Directors simply do not have the understanding of the mechanics or the day to day activities of the business which they purport to run.

For example I have worked in trading environments where totally unrealistic profit target have been passed from Board level to trading departments. No cognisance having been given to the disproportionate risks which need to be taken to achieve these targets.

Some of the most spectacular financial flame outs have followed a period of ostensibly highly successful trading. In their desire to recognise these “profits” no thought were given as to how they were being made. In such times it would be well to take note of the old adage that is something looks to be too good it usually is!

If your company is bucking the trend in these difficult times it may well be that you are implementing a winning formula.

However history tells us that it is often a prudent course of action to look under a few stones – just in case.

A Spectator always sees more of the game

During my various assignments one observation holds true – whilst there are very few truly bad businesses, there are many that benefit from a fresh input.

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

This is where an “outsider” can be of assistance – an objective appraisal can very often mean the difference between merely drifting as opposed to decisively moving forward