My vision of Ensuring in Diversified Businesses Profitability and Positive cash flows:

My vision of Ensuring in Diversified Businesses Profitability and Positive cash flows:

Revenue Generation and Cost Savings in these tough financial times:

 Mission: If this is done correctly, no Business can lose money.

Index:

1)  Revenue Generation.

 2)   Cost savings.

 3)  Value Engg of costs at gross level

 4) Measurement of Performance

5)  Process Review.

1) Revenue generation:

 The revenue can be increased by   having correct pricing strategies, which will vary in every business model.  Pricing strategy needs to be in align with what Profit and loss account of the business can afford.

At times, one should be open to use a Minimum Variable Pricing Model   to cover the variable costs, and bear the fixed cost. This pricing helps in increasing volumes of sales and contributing to the Break even.  This is very effective in current times when it is difficult to get the right volume of sales at acceptable gross margins.

 One can also link revenue generation to a limiting factor. In many manufacturing companies Labour Recovery rate (LRR) is used to price a job.

 Organizations can also go for revenue increase by lowering the margins if cash flows are ensured significantly, a good component of advance is adhered to.

 Many organizations confuse between Margins and Mark up. They factor Margin at a standard rate. The correct commercial practice is to consider Mark up. This ensures that the costs are FIRST covered adequately.  This is very valid in retail/ trading organizations.

 The revenue strategies need to be reviewed frequently and there is no harm in having differential revenue policies for repeat customers, one time customers, and customers with different geographical reach.

 No revenue generation is effective, if effective payment terms are not used to secure collections and contractual agreements are not studied properly.

 Organizations lose money   if the payment terms and contractual terms are not carefully reviewed and agreed before   finalizing a sales deal.

We need to ensure to claim variations. / add on/ mock up items/ samples if on chargeable basis.  

 Therefore, Revenue strategies need to be in line with the phase where your business is- Survival, Growth, Growth cum acceleration, restructuring.

2)  Cost Savings:

One cannot have costs if profit and loss account cannot afford.

Therefore, the need is to align both fixed and variable cost structure to the Profit and loss account.

The classification of costs into fixed and variable needs to be done from business perspective. Finance needs to drive the same.

 Every item needs to be looked into and relate to the limiting factor. i.e. to have one unit of a particular item, how much cost is needed.

 Employment cost is one where companies often do quick reduction. It needs to be looked at from productivity, orders in hand, over all morale, and industry bench marks.

 Knowledge of diversified businesses help in doing this exercise as every industry and every cost structure is unique.

Working out Cost Control strategies, cost implementation plan, and successful execution of cost control strategies and cost control plan are key ingredients for a successful execution of cost control plan.

  Taking everybody on Board on cost control measurements is the most significant element of this exercise.

3)  Value Engg at Gross level:

This is the most significant area where costs can be brought under control.  All the elements of cost at the gross level- material, labour, sub contract pricing, bought out items need to be looked in.

If the costs are handled accurately at this level, organization can save money and be in Profits always.

 Is Substitution possible?

Are better methods available to achieve costs savings?

 Should you do something in house, or do it out side?

 Revisit purchase deals with the suppliers??

Can you have a sole service agreement with the suppliers??

 Better Payment terms??

Inventory holding?

 Ware housing space?

 Why Labour hours have gone more than the estimates,

 Why was there a re work? Who is responsible??

 Should you have an in-house freight clearing mechanism.

4)  Measurement and Monitoring of Group Performance:

 -- Why is group losing money, how to stop the bleeding, and what remedial actions need to be taken and implemented?

--   If group is making money, why? Sustaining growth, enhancing growth.

--- Creating financial benchmarks.

---- Setting Meeting and Review Protocols, timelines for Group Performance -- MRM’s, Business plan, Strategic plans meeting, Review of profit and loss account and other specific Performance Measurement tools

--- Setting performance measurement tools for individuals/ senior management.

 Such Reviews/ meetings, are the most important and CFO needs to drive the same. If full justice is done to these meetings, organizations cannot lose money.

5)   Process Improvements/ Process Reengineering:

 -- Setting processes from scratch.

--    Improving specific processes.

----- Processes internal to the business environment.

----- - Processes external to the business environment.

----- Process Productivity.

------ Differentiating   a bad process from a good process.

------ Implementing Policy, Procedures.

------   Critical Review of existing practices, Policy, Procedures, Processes and improvements there at.

  Right and effective processes can help organization make and save money.