Ahmed Adel’s Post

Great post to share w/ my students, that is pretty much my first lecture in my Intro to SCM course…The one-page handout in the lecture can be found in the comments section: https://lnkd.in/gVZ_zJbB. https://lnkd.in/g8e-y-3d https://lnkd.in/gn-97v_B Remember, ROI = profit margin * asset turnover rate (ATR). ATR = sales/total assets and total assets = current assets + fixed assets, and current assets = inventory + accounts receivable + cash. I keep telling my students if they can widen margins and/or increase ATR, then ROI will go up. So, if you can reduce your total assets without changing sales and/or increasing sales, then ATR goes up. For example, reduce your inventory and your ATR will go up and ROI will go up. If you can do more with less, then your ATR will go up. No other major/function (SCM) has a greater impact on what goes into the ROI calculation. That is why SCM graduates will likely be immediately bonus eligible and their highest ranking functional area (SCM) leader will have a VP in front of their name (VP of SCM). What are most companies doing to increase ATR? I also asked this in class and it was one of the most important parts of the lecture. It was a major reason for the supply chain chaos during covid! Hint: xxxsourcing. Do you know the answer?  The answer to this question has been the focus of most supply chain organizations for the last 30+ years.  Why would doing this increase ATR? Answer: it helps them do more with less (better, faster, cheaper). Lastly, I am of course a huge fan of the Business Analytics minor for all business majors. For details: https://lnkd.in/g6eTb6SC. I am also a huge fan of the Accounting minor. Why? College Accounting to me feels like Supply Chain/Corporate Finance. The Accounting Minor for SCM Majors & most other majors seems like a great fit & has grown on me. Long term in your careers, understanding SCM/Corporate Finance will be critical. Basically, your opportunities are endless if you learn how to talk to the CFO. You will hit a ceiling professionally if you cannot talk CFO talk. Tomorrow’s CEOs Will Come from an Unlikely Place: The Supply Chain: https://lnkd.in/gcbie2iD. https://lnkd.in/gBPZJsVq I had a student ask: Shouldn’t I major in Finance or Accounting if I want to become a CEO? Note, (I encourage my SCM students to get an Accounting minor): College Accounting to me feels like Supply Chain Finance. The worlds of Finance & SCM have collided. Your opportunities are endless if you learn how to talk to the CFO…https://lnkd.in/guejd-vi. Two classes in our Accounting minor, good fit for SCM types, right?: 3220: Cost & Managerial Accounting and ACTY 4220: Cost Mgmt & Analytics. FYI, we make EVERY business major take FIN 3200 - Business Finance Decisions.

The procurement department maintains a crucial relationship with the finance department within an organization. **Procurement** involves acquiring goods and services. It requires careful budgeting and cost management, both of which are deeply intertwined with financial considerations. **Finance** is responsible for managing the organization's financial health, including budgeting, accounting, and reporting. **Collaboration** between procurement and finance is vital for several reasons: 1. **Budgeting and Planning:** Procurement relies on finance to set and manage budgets. Finance determines how much can be spent on various goods and services, ensuring that procurement activities align with financial constraints. 2. **Cost Control:** Procurement negotiates prices and seeks cost-effective solutions while finance monitors expenditures to maintain financial stability. Together, they work to minimize costs and optimize spending. 3. **Reporting and Compliance:** Finance requires detailed reports on procurement activities for auditing and compliance purposes. Procurement must provide accurate data to ensure transparency and accountability. 4. **Risk Management:** Both departments collaborate to assess and mitigate financial risks associated with suppliers or market fluctuations. The synergy between procurement and finance is essential for ensuring that the organization's purchasing strategies support overall financial goals, contributing to sustainable growth and financial health.

When someone with a finance background steps into a procurement role, it opens up new opportunities to drive value across the organization. Traditionally, procurement focuses on sourcing and supplier management, while finance is concerned with budgets, cash flow, and financial planning. Combining these skill sets allows for a more strategic approach to procurement that benefits the entire business. 1) Aligning Financial and Procurement Goals: A professional with finance expertise can align procurement strategies with broader financial objectives, such as cost control, profitability, and return on investment. This ensures that purchasing decisions not only meet operational needs but also contribute to financial health. 2) Enhanced Spend Visibility and Control: Leveraging financial acumen, they can provide deeper insights into spending patterns, identify cost-saving opportunities, and ensure compliance with budgetary constraints. This integrated view helps organizations manage their expenditures more effectively. 3) Improved Cash Flow Management: With a strong understanding of cash flow, a finance-trained procurement professional can negotiate better payment terms with suppliers and optimize payment schedules, reducing pressure on working capital and enhancing liquidity. 4) Data-Driven Decision Making: A finance background brings analytical rigor to procurement, enabling data-driven decisions based on supplier performance, market trends, and cost analysis. This approach can lead to more strategic sourcing and better supplier relationships. 5)Risk Mitigation: Finance professionals are adept at identifying and managing financial risks. In procurement, this translates to better risk assessment of suppliers, more robust contract negotiations, and comprehensive risk management strategies that protect the organization. Streamlined Processes and Efficiency: Their knowledge of financial systems and controls can improve procurement processes, reducing errors and increasing efficiency through better integration of procurement and finance systems.

‏🌟 **The Critical Relationship Between Purchasing and Finance** 🌟 ‏🔍 **Why this relationship matters:** ‏1. **Budget Management**: The Purchasing Department plays a key role in managing budgets. By collaborating closely with Finance, they ensure that procurement practices align with financial strategies, optimizing resource allocation. ‏2. **Cost Control**: Effective purchasing decisions directly impact a company’s bottom line. Finance provides the necessary insights into cash flow and financial forecasting, allowing Purchasing to make informed decisions that minimize costs. ‏3. **Supplier Relationships**: Strong financial backing enables the Purchasing Department to negotiate better terms with suppliers. Finance can assist in evaluating supplier risk and ensuring that payment terms are favorable. ‏4. **Strategic Planning**: Both departments must work together to align purchasing strategies with overall business goals. This collaboration enhances operational efficiency and supports long-term growth. ‏5. **Risk Management**: By sharing data and insights, Purchasing and Finance can better identify potential risks in the supply chain and develop strategies to mitigate them. ‏In conclusion, fostering a strong partnership between Purchasing and Finance is essential for driving efficiency and achieving organizational goals. Let’s embrace collaboration and work towards a more integrated approach! 💼✨ ‏#Purchasing #Finance #Collaboration #BusinessStrategy #CostManagement #إدارة_المشتريات #الماليه.

When it comes to structuring the procurement department within an organization, the decision of where it sits can significantly influence its efficiency and effectiveness. There are generally three common structures: under the Finance Department, under Shared Services, or directly under the CEO. Each has its own unique advantages and potential challenges. 1. Under the Finance Department: Placing procurement under finance ensures a strong alignment with budgetary control and financial oversight. This structure can drive cost efficiencies and maintain strict adherence to financial policies. However, it may limit procurement’s ability to be agile and responsive to operational needs, as decisions might be heavily influenced by financial constraints. 2. Under Shared Services: Positioning procurement under Shared Services centralizes resources and promotes standardization across the organization. This can lead to process efficiencies, consistent vendor management, and improved negotiation power due to consolidated purchasing. Yet, it might dilute the strategic importance of procurement, reducing its influence on core business functions. 3. Directly Under the CEO: When procurement reports directly to the CEO, it underscores the strategic importance of the function. This structure allows procurement to have a direct line to leadership, ensuring alignment with the company’s broader business goals. It fosters agility, innovation, and the ability to rapidly respond to market changes. However, it may lead to challenges in maintaining consistency in procurement practices across departments. In Conclusion: The optimal placement of the procurement department depends on an organization’s specific goals and culture. Whether it’s under finance for budgetary control, shared services for efficiency, or the CEO for strategic alignment, the key is ensuring that procurement is empowered to drive value across the business. Where does your procurement department sit, and how is it impacting your organization’s success?

Mastering Accounts Payables Management: The Key to Financial Control! As a financial professional, you know that optimizing accounts payables processes can revolutionize financial control and drive business success. Here's why it matters: 1️⃣ Cash Flow Optimization: Streamlining AP ensures timely payments and enhances cash flow management, providing the financial stability needed for working capital management, growth, and investment. 2️⃣ Enhanced Accuracy: Rigorous AP management reduces errors, minimizes discrepancies, and ensures financial data integrity, empowering better decision-making. 3️⃣ Cost Savings: Effective AP management directly impacts the bottom line by negotiating favorable terms, leveraging discounts, and eliminating late payment penalties. 4️⃣ Strengthened Supplier Relationships: Cultivating strong relationships with suppliers through timely payments and transparent communication fosters trust and unlocks strategic partnerships. Unlock the power of efficient accounts payables management and take control of your financial future. #FinancialControl #AccountsPayables #CashFlowOptimization #CostSavings #SupplierRelationships #RegulatoryCompliance #FinancialManagement #BusinessSuccess

🌟 **Role of a Costing Officer in an Organization** 🌟 As a **Costing Officer**, one plays a crucial role in ensuring the financial health and operational efficiency of a business. Here are some of the key responsibilities: 📊 **Cost Analysis & Reporting** Regularly analyze production costs and provide detailed reports to help management make informed decisions. 🔍 **Budgeting & Forecasting** Assist in preparing budgets and cost forecasts, enabling the organization to allocate resources effectively. 📈 **Variance Analysis** Monitor cost variances by comparing actual costs to the budgeted or standard costs, identifying the root causes, and recommending corrective actions. 📦 **Inventory Management** Maintain accurate records of inventory costs, ensuring that stock levels are aligned with operational needs while minimizing excess costs. 🔧 **Cost Control & Optimization** Work closely with various departments to identify cost-saving opportunities and improve overall operational efficiency. 📚 **Financial Compliance** Ensure that all costing activities comply with relevant accounting standards and internal financial controls. The role requires attention to detail, strong analytical skills, and a deep understanding of financial principles. Costing Officers help businesses stay competitive and profitable by ensuring accurate cost tracking and reporting. #CostingOfficer #FinanceRoles #CostManagement #BusinessEfficiency #FinancialAnalysis #Accounting

The Importance of Forecasting in Accounts Payable Effective forecasting in accounts payable is crucial for maintaining healthy cash flow and ensuring that a business can meet its financial obligations. By predicting future payment cycles and supplier needs, companies can optimize their liquidity and strategic planning. Key Benefits of AP Forecasting: 1. Cash Flow Management: Accurate forecasting helps businesses anticipate cash outflows, allowing for better cash management and investment opportunities. 2. Supplier Relationships: Understanding payment cycles enables timely payments, strengthening relationships with vendors and possibly securing better terms. 3. Risk Mitigation: Forecasting helps identify potential cash shortfalls, allowing businesses to take proactive measures to avoid disruptions. 4. Operational Efficiency: Streamlined processes based on forecasts can reduce bottlenecks and improve overall accounts payable efficiency.

10 tactics to control costs A guide which provides you the tools for cost reduction When I was head of finance, we were facing a challenge: → How to reduce our hourly rate to stay competitive This became my number one priority to help the business And we succeeded to decrease our hourly rate by 3% while inflation was up! Today I am sharing the tactics to reduce costs: 1. Budgeting and Forecasting: • Importance: Plan and estimate costs, revenue, and expenses. This is where you can get your team to commit on cost reduction. • Focus: Use accurate data and update budgets regularly. 2. Variance Analysis: • Importance: Compare actual performance with budgets to identify deviations. If you found a variation, there is a big chance that you have a topic to explore to reduce costs. • Focus: Investigate significant variances for improved accuracy. 3. Cost Allocation: • Importance: Distribute indirect costs for accurate pricing and control. • Focus: Maintain fair and updated allocation methods. 4. Activity-Based Costing: • Importance: Assign costs to specific activities for better resource allocation. • Focus: Identify and measure cost-driving activities accurately. 5. Zero-Based Budgeting: • Importance: Justify every expense to optimize resource allocation. • Focus: Balance rigor with operational continuity. 6. Cost-Benefit Analysis: • Importance: Compare project costs with expected benefits. • Focus: Consider tangible and intangible factors. 7. Cost-Volume-Profit Analysis: • Importance: Understand how sales, costs, and pricing impact profitability. • Focus: Validate fixed and variable cost assumptions. 8. Inventory Management: • Importance: Optimize inventory levels to reduce costs. • Focus: Use EOQ and JIT techniques for efficiency. 9. Vendor Management: • Importance: Evaluate and maintain supplier relationships. • Focus: Assess performance and diversify suppliers. 10. Procurement Management: • Importance: Acquire goods at the best cost with quality. • Focus: Establish clear procurement processes and collaboration. 👉 What is your favorite method to find cost reductions?