Posted on January 29, 2012
There are many simple ways one can reduce costs in business supplies, from changes in telephony to a paperless office. One solution that many businesses choose at start up, is working from home. It is not as easy as being in an office situation, as self-motivation is paramount, but one can still employ staff and interconnect via the new ways of communications. Consider doing away with your landline telephone.
You can use VoIP (Voice over Internet Protocol) which uses your computer to communicate free or for a fraction of the cost of maintaining a telephone. There are some good deals on mobile phones that also give better service than a landline. It is a consideration well worth exploring. Making your office paperless through use of your computer will save money on all the paper, ink, envelopes, paper clips, and other supplies that an office using paper requires.
You can email your invoices, scan and save documents to your computer and only print if necessary. You will not need many filing cabinets, but you will have to ensure that you have a very good back-up service. You can back up to on-line storage websites, or buy an external hard disk and programme it to back up each evening after work. If you are unable or unwilling to try a paperless office, then shop around for your office supplies.
There are many businesses in competition with one another, and all want your patronage. Some firms offer free delivery, others offer discounts, some will offer 'sweeteners' to get your custom. Get to know one supplier for repeated good service. One needs to have good software for keeping track of business, one that will generate invoices, receipts, estimates, and do double-entry book-keeping. There are dozens of programmes available, but scan the internet for free programmes before you spend unnecessarily. These are known as 'open-source software' and are open to the public.
Ensure you have a good anti-viral programme before using these. Look at second-hand office equipment before you furnish an office from scratch. Manufacturers sell refurbished stock, and it is possible to buy used furniture in auctions, either on- or off-line. You might also look at relatively inexpensive premises to begin with, rather than going for a top address. After all, you can always move upwards - a lot easier than downsizing.
Market your business on-line, as this gives a high turnover for low outgoings. If you are not as computer literate as you would wish, you can find marketing courses that will bring you up with a worthwhile investment. Use a business credit card if possible, to keep your business expenses separate from personal ones. If applicable, get business credit cards with an appropriate top limit for your employees. This saves the petty cash situation, which can be time consuming and difficult if a receipt for an item is not received.
Keep a close eye on what your employees are spending and why. When it comes to business supplies, a financial plan is indispensable, and it should be a tool used daily. With it, you can see where expenditure is high and take appropriate action to reduce it effectively.
Posted on January 25, 2012
Years ago, small businesses would source products locally. Even though they may be able to purchase a product at a lower cost overseas, the cost of shipping and importing these products was very expensive. This meant that disruptions in getting products to market were relatively predictable. The suppliers, the sellers and buyers for the products were all local so there were subjected to the same economic and environmental conditions.
In a global economy, the cost of importing goods has decreased dramatically and businesses now source products from many parts of the world. With this freedom to source from many areas of the world comes a new set of issues to the business owner. Volatile currency exchange rates along with disruptions in the supply chain from earthquakes, fires, flooding and political instability in Asia or Europe can potentially destroy a local business overnight. Most companies do not plan for these issues until it is too late. Desperately working to find new suppliers for goods that you have already received orders for can start a negative business spiral that increases expenses, reduces margins and creates bad customer relations.
Successful companies now realize that they must reduce this risk to their business by developing contingency plans before a crisis occurs. To develop these plans they use a process called Scenario Planning. Scenario planning allows a business to investigate and create alternative plans to ensure their business is secured against disruptions from external forces outside of their control.
In this article we will review the steps to effective scenario planning.
Step 1 in scenario planning is to define the objective.
In our business example we are going to look in detail at our theoretical companies supply chain. Our business has 20% of the product line representing 80% of the bottom line profit. We find that 90% of the profitable product line comes from Asia and Europe. Typically our lead times from these suppliers are 4 weeks. We keep a small inventory for emergencies in Canada. So we have identified that we rely heavily on the supply chain to keep inventory low and to meet customer service levels.
Based on this information we decide that our objective is to review possible scenarios that adversely affect our supply chain. In each scenario we will review how the business metrics of cash flow, inventory, cost of sales and lead times are affected. We decide to select team members involved with the supply chain, including purchasing, inventory, manufacturing (if there is any component done here) and shipping.
Step 2 is to define key drivers that affect the supply chain scenarios. In this case we would look at the product suppliers and the logistic companies involved in delivering the goods to our location.
Step 3 is to collect data. We contact the suppliers and logistic companies to ask for their scenario plans. Do they rely on one plant to manufacturer the goods? How many "down days" do they have each year over the last 5 years? What if a labor strike or a natural disaster were to hit their plant, what is their plan to minimize product supply delays? What plans does the shipper have if a typhoon or a weather issue closes their main hub?
Step 4 is to create the scenarios that are based on the data collected. Is there is a time of year risk to any parts of the supply chain due to weather? What happens if political tensions or natural disasters affect the country where the main plant for the manufacturer is located? These scenarios need to be tested to see their affect on cash flow, the ability to meet orders, inventory levels as defined in step 1.
Step 5 is to present the scenarios to management and decide which ones have the greatest risk to the business. We then create strategies and contingency plans, such as increasing inventory during known times of bad weather in the region of the supplier, or investigate using other suppliers or logistics companies from different regions. Perhaps the logistic company can inventory a defined number of high moving profitable products as a contingency plan.
Finally these plans must be revisited on a regular basis to be updated based on changes with suppliers and logistic companies and company objectives.
In a world wide economy, a snow storm in Europe or a flash flood in Asia could have an adverse affect on your cash flow and business growth.
Today's fast paced, fiercely competitive business environment leaves little margin for error or indecision. A consulting CMA, such as Numbers Plus's own Mark Stebbing, brings you a seasoned professional equipped with years of specialized training and business experience. Mark is trained to provide solid strategic advice, sound business management and decisive leadership and of course sound accounting and tax advice.
Posted on January 22, 2012
European leaders have warned of a difficult year ahead, as many economists predict recession in 2012... so the BBC reports. They go on to say that growth in Europe has stalled as the debt crisis has forced governments to slash spending. The leaders' New Year messages came as leading economists polled by the BBC said they expected a return to recession in Europe in the first half of 2012.
However, it doesn't have to be all doom and gloom.
Whilst the inevitable chaos caused by recession has a tendency to push organisations into retreat this is not always the case. Did you know that iconic companies like:
Disney, CNN, MTV, Hyatt, Burger King, FedEx, Microsoft, Apple, Gillette, AT&T, Texas Instruments, 20th Century Fox, IBM, Merck, Hersheys, IHOP, Eli Lilly, Coors, Bristol-Meyers, Sun, Amgen, The Jim Henderson Company, LexiNexis, Autodesk, Adobe, Symantec, Electronic Arts, Fortune, GE, and Hewlett-Packard
were all founded during periods of economic recession.
One definition of chaos suggests that it is the uncertainty sparked by uncharted territory, economic recession, and bubbles of opportunity. We seem to phase in and out of this chaotic state... a state of randomness and disorder. The ebb and flow happens in an almost natural way, almost mimicking what occurs in the natural world. This system of natural governance that blends the characteristics of chaos and order is known as the chaordic state.
The good news is that we can use the significant power of these chaordic forces to help with generating revenue and growth, so important for our future economic survival.
One such way could be to embark upon a business transformation programme, another might be to merge with or acquire another company. All of these require change... something that we have to accept is a permanent feature of the world in which we all live.
So what is business transformation - well, it's all about aligning people, process and technology to achieve some previously agreed significant change. These three areas also feature as being important when considering an integrated approach to the associated areas of governance, risk and compliance within an organisation.
Our Business Transformation Consultant comments on the importance of making sure your desired significant change is relevant and appropriate ie is your business strategy "fit-for-purpose" and correctly aligned with what is going on in at the operational level? It could be that in order to achieve your strategic objectives you need to merge with and/or acquire another company... or it could be that organic growth is what is needed.
The conclusions from a recent Economist Intelligence Unit report on business transformation highlighted that the ability to manage change effectively is a great competitive advantage. It goes on to make the point that external crises such as what we are experiencing at present help to drive change in organisation and provide a "burning platform" for change, but emphasises the importance of the people-related challenges.
Several years ago, an earlier white paper from our own consultancy promoted the benefits of using a ten-step approach for generating prosperity from the deteriorating economic conditions at that time. It is encouraging to see that recently, the Kepner-Tregoe consultancy has been recommending a similar approach in their paper about coping with uncertainty in the business environment. The key message from both approaches is the importance of developing a clear business strategy and then maintaining strategic directions and integrity when times get tough.