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Bottleneck-oriented
Business Management |
by:
Stephan
Szugat |
Simple and effective
Business Management
In every enterprise there are, at every time, one or more bottlenecks,
which have influence to the commercial situation. Bottleneck-oriented
business management has the purpose to early track the bottlenecks
and to remove them, to allow an optimum of commercial development.
To know at any time, what a business lacks of and to be able to
add the missing things, is today a determining competition advantage.
Bottlenecks can be, e.g.:
low sales proceeds
high due or overdue accounts receivables
low liquidity (Cash on Hand, etc.)
high amount of liabilities
low number of customers
too many new customers
too high capacity utilization
defective administration or management
and a lot more.
These example show that bottlenecks not only concern negative
circumstances, but also can apply to positive commercial development.
If an enterprise takes up many new customers, this results in
new orders, which lead to other circumstances, like a possible
excess in capacity utilization. In case the excess of capacity
utilization stays for a longer time, this may result in a lower
employee motivation, because of a slump in working atmosphere
within the company, which then could lead to less qualtiy of the
work performed.
Due to a TIMELY reporting system many companies take care of reaching
the desired commercial development. However, a regular analysis
of expenses or the annual reports are not enough to control a
business today. In the today's dynamic markets these evaluations
are too statical, too much oriented on the past commercial development,
which had been achieved. Also cost accounting only shows what
has happened in the past. The actual direction in which a business
is running could not be seen.
Imagine a business to be a car. If you sat down in a car, do you
like to receive information from the instruments from the last
year or month? Probably not. You would like to have actual information
about fuel tank content, coolant temperature and a lot more. Bottleneck-oriented
business management should exactly bring the most important and
actual information about a business to you, including so-called
early warning signals (Screenshot abenetis ERS-Diagram).
Data oriented to the past for early-warning-systems?
A working early-warning-system needs data which are not oriented
to the past, like from cost accounting or year-/month-end-closeings.
It needs data from so-called early indicators, which has to be
gathered from different areas of an enterprise. Of course, figures
from the finance and accounting department belong into an early-warning-system,
but they only have a subordinated role, because they are oriented
to the past.
Nowadays the reporting must show the present situation of a business.
In many businesses the expenditure of time for the reporting rose
considerably, due to the today's flood of information. Aggravatingly
added to this, is the selection of the really relevant business
ratios, which allow an appropriate overview of the actual business
situation. Too often reports are prepared, which are not perceived
by anybody, due to the lack of necessary statements about the
business development.
There are already proven business-ratio-systems, that enterprises
only need to take over. Get back into the car again, imagine you
have only one instrument in front of you, which shows the value
"35". What does this signify? It is not recognizable how many
fuel exists, how the Temperature of the coolant is or how fast
the car is driving, etc.
At this example you could recognize the little expressiveness
of only one business ratio. It shows the importance to use the
right business ratios, which must have a connection to each other
and which have a different temporal origin. Nevertheless, many
business ratio systems are mostly based on data which originate
from the past.
This turns often to the problem, that immediate information are
not available, to indicate the actual situation of a business.
However, there is still the alternative, to reduce the period
of the past. How would it be with one week instead of analysing
business data every 4 weeks? This would lead to the fact that
you could act a few weeks earlier, if something should run a little
bit inclinedly.
Only very few data are needed to receive an informative evaluation.
This again is comparably with a car. If you are driving with your
car, you only receive a small, well-chosen number of information
and nevertheless, have an actual picture of the situation. This
is also possible for businesses, as well!
As a motorist we receive only one fraction of the data which is
acquired by the system of the car, and just these fraction of
information is enough for us to reach the desired destination.
When traveling usually we are well prepared, but the principle
of the preparations is often neglected in business operation.
As it is with traveling, the final goal has to be clearly stated
by the business management. This could be done by having planing
data available. Only by target/actual comparison divergences of
the commercial development will be recognized.
Unfortunately, many small businesses renounce to use plan data.
Besides, it is not about, to cut plan data into the smallest pieces,
but only to get a rough picture, what the business is going to
achieve. It is absolutely possible to run a business on the basis
of the figures from the previous year, however, to use these figures,
the past commercial development should be taken into consideration.
So the figures from the previous year should be improved to fit
with the new goals. And finished are the planning data and the
basis for an operational risk management are laid. Still if it
is most important to know the actual bottlenecks in business operation.
Recognize problems and act!
One of the most important factors in business management is the
early recognition of problems and potentials. There are bottlenecks
in every business, which could have serious results. Pecuniary
difficulties could lead to bankruptcy for example. Therefore symptoms
must be recognized early, in order to turn a possible crisis away
and to secure the future of your business. Also to use available
potentials, regular analyses should be done. Nowadays products
and services could not be sold forever, because product cycles
become shorter and shorter due to market dynamism. The recognition
and development of potentials is exceptionally important, to avoid
losing the already achieved basis of a business.
About the author:
Stephan Szugat is founder of abenetis a web-based service about
Business Management Solutions focusing on the core needs of business
management. This includes operational and strategic analysis especially
Early-Recognition-Systems, Knowledge-Management and other Services
for small and mid-sized businesses. He has approx. 15 years experience
in the Finance and Accounting Area from companies of different
size and from various industries. http://www.abenetis.com
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