If we believe what we read in the media, the UK may be heading for recession. It is at times like this that many businesses panic, pushing sales staff harder, breaking lines of communication and confusing the focus of the business. What they should be doing is looking inwards and setting in place the correct procedures for the business to service, regardless of the climate. Adopting an inward focus can effectively add up to 25% gross profit to the bottom line of your business.
Ask yourself some soul-searching questions. Are you satisfied that your internal procedures are following industry best practice? Are the goods and services you are supplying and buying providing both you and your clients with value for money? Not sure? Here are some areas that you should be considering.
Review sales strategies
Sales are key to all businesses. How long does it take you to bring on a new customer? As part of your review strategy, consider the following:
In a bid to obtain sound business, smaller companies often accept unreasonable payment terms when dealing with larger clients. They may even be shy to ask for a decent rate for the job. This often impacts on the cash flow. You have a healthy order book, but your bank balance suffers. If you do not bring this area of your business under control, your company could fail. Ask yourself the following:
It is important to have good relationships with your suppliers. After all, you are dependent on them. But the way you do business with your suppliers could be costing you more than you think. In an average business, the process of raising a purchase order through to invoice payment can cost the business, on average, £80 per transaction. Multiply this by the month's volume and it can stack up
What about employees?
The major resource in many businesses is the employees. You must look after them, especially in a time of business downturn. Ensure they are happy in their work, and don't forget that every member of a happy team is a sales person for the company. Consider the following:
Processes and policies
When was the last time you looked at your internal processes? How have they developed since you, or members of your staff, introduced them? Often people change the processes to meet their own needs. However, this may be costing you money:
Your stock position and how you have changed your stocking policies over the years are also relevant. With modern ordering techniques, it is no longer necessary to keep as much stock as previously, or to hold different types of products 'just in case'. Many suppliers can now deliver within 24 hours and will take on the burden of keeping a wide range. Some questions here are:
Good suppliers are worth their weight in gold, but you need to ensure that your suppliers are providing value for money. Areas for consideration are:
By streamlining the way your business operates it is possible to reduce head count, getting the remaining staff fully focused and working in the capacity for which they were employed. Suppliers can deliver an improved service, while creating a far more effective bond between you and them. Factoring and invoice discounting can improve your cash flow, as can negotiating better rates and payment terms with your own clients. Creating your own purchasing policy, rather than accepting that of your supplier can give you greater control. The list is endless, but one thing remains constant: taking an inward look at your business can be lucrative, and may provide you with a useful edge.
Deborah Glen is a director of CY Associates Limited which provides support in procurement management and consultancy, Tel: 0870 2402904, www.cy-associates.com