Friday, January 10, 2020

Business management oriented to the bottleneck

Business management oriented to the bottleneck

Simple and effective business management

In each company there is, at all times, one or more bottlenecks that influence the commercial situation. The business management oriented to the bottlenecks has the purpose of early monitoring of the bottlenecks and eliminating them, to allow optimum commercial development. Knowing at any time what a business is missing and being able to add the missing things is today a decisive competitive advantage. Bottlenecks can be, for example:

low sales revenue
accounts receivable high or expired
low liquidity (cash on hand, etc.)
large amount of liabilities
low number of customers
too many new customers
high capacity utilization
faulty administration or handling
and much more.

These examples show that bottlenecks not only refer to negative circumstances, but can also be applied to positive business development. If a company takes many new customers, this results in new orders, which leads to other circumstances, such as a possible excess in capacity utilization. In case the excess capacity utilization is maintained for a longer time, this may result in a lower motivation of the employees, due to a depression in the work atmosphere within the company, which could lead to a lower quality of the work done.

Due to a timely reporting system, many companies are responsible for achieving the desired commercial development. However, a regular analysis of expenses or annual reports are not enough to control a business today. In today's dynamic markets, these assessments are too static, too oriented to past commercial development, which had been achieved. In addition, cost accounting only shows what happened in the past. Could not see the actual address where a business is running.

Imagine that a business is a car. If you sat in a car, would you like to receive information on the instruments of the last year or month? Probably not. He would like to have real information about the content of the fuel tank, the coolant temperature and much more. The bottleneck-oriented business management should provide you with exactly the most important and real information about a company, including the so-called early warning signs (ERS Abenetis screen capture diagram).

Past-oriented data for early warning systems?

An early warning system that works needs data that is not oriented to the past, such as cost accounting or year-month end-of-year closures. You need data from the so-called initial indicators, which must be collected from different areas of a company.

Today the reports should show the current situation of a company. In many companies, the expense of time for reporting increased considerably, due to the avalanche of current information. To this is added aggravatingly the selection of really relevant business relationships, which allow an adequate overview of the actual business situation. Too often reports are prepared, which nobody perceives, due to the lack of necessary statements about the development of the business.

There are already proven business relationship systems, which companies only need to assume. Go back to the car again, imagine that you only have one instrument in front of you, which shows the value "35". What does this mean? The amount of fuel that exists, the coolant temperature or the driving speed of the car, etc., is not recognized.

In this example, I could recognize the poor expressiveness of a single business relationship. It shows the importance of using the right business relationships, which must have a connection with each other and have a different temporal origin. However, many business relationship systems rely primarily on data that originated in the past.

This often addresses the problem, that immediate information is not available, to indicate the real situation of a business. What would it be like with a week instead of analyzing business data every 4 weeks? This would lead to the fact that he could act a few weeks earlier, if something worked a little inclined.

This is again comparable to a car. If you drive with your car, you only receive a small amount of well-chosen information and yet you have a real picture of the situation.

As a motorist, we receive only a fraction of the data acquired by the car system, and only this fraction of information is sufficient for us to reach the desired destination. When we travel, we are generally well prepared, but the principle of preparations is often neglected in commercial operations. As with travel, the final objective must be clearly established by the company's management. This could be done by having planning data available. Only by objective / real comparison will the divergences of commercial development be recognized.

Unfortunately, many small businesses give up using plan data. In addition, it is not about cutting plan data into smaller parts, but only to get a rough idea of ​​what the business is going to achieve. It is absolutely possible to run a business based on the figures from the previous year, however, to use these figures, past business development must be taken into account. Therefore, the figures for the previous year should be improved to meet the new objectives. And the planning data is finished and the basis for operational risk management is established. Still, if it is more important to know the real bottlenecks in the commercial operation.

Recognize the problems and act!

One of the most important factors in business management is the early recognition of problems and potentials. There are bottlenecks in all companies, which could have serious results. Material difficulties could lead to bankruptcy, for example. Therefore, the symptoms should be recognized early, to avoid a possible crisis and ensure the future of your business. Also to use the available potentials, regular analyzes should be performed. Today, products and services cannot be sold forever, because product cycles become increasingly shorter due to market dynamism. The recognition and development of potentials is exceptionally important, to avoid losing the already reached base of a business.