It’s the start of a new year and a good time to take stock of the last twelve months. If it coincides with your financial year end, you will get to do a stock take too. Either way a ‘stock take’ on last year is probably a good idea!
Has the business ended up in a better place than it was this time last year? Have you achieved what you hoped to in a very uncertain and increasingly unpredictable environment?
Here are some tests
Do you produce, process and market more efficiently than you did a year ago?
This could be as simple as being up on volumes and reducing wastage by virtue of better utilisation or it could be that the business has learnt to manage resources better and is now making more of what is profitable and less of what is not profitable? Things like aggregating orders so that batch sizes are bigger, the interface losses between batches are managed better or as simple as being much more practiced at product changeovers?
Did you understand your customer better?
Did you anticipate what your customer wanted, when they wanted it and their attitude to what value looks like given price increases in most food and drink sectors look inevitable. Have you been able to improve your forecasting or responsiveness to the changing environment? Even the most basic Management Information Systems have helped many to achieve this.
Is your cash position better or worse than last year?
Not just the cash in the bank, but the amount of working capital you have available. Have the debtor-days reduced (number of days you wait for your money to come back from customers)? Have you been able to improve the trade credit from your suppliers? Is the business’ credit rating better or worse after this year? There might be simple things you can do to improve all of these.
Has the business grown in value?
Have you invested in the branding, grown revenues for branded products, created some intellectual property (IP) through product and market development? Do you know what it costs to acquire customers? Is the business potentially more valuable if someone wanted to acquire it and do you know how to value your business? Are your trademarks protected, designs registered and balance sheet stronger? Even if revenues stood still or went backwards, there are other ways the business can acquire and protect value.
New year’s resolutions
Given the year of ups and downs, some will be just wanting to get past February with as many outstanding invoices paid and some stability in the marketplace.
What is it all costing?
Perhaps now is a good time to review the purchase ledger codes or nominal codes. Being able to split-down the costs associated with products, channels (e-commerce, retail, wholesale) or even by customers so that the profitability (or otherwise) of products, customers and channels can be assessed, so that decision making is easier. Aim to do more of what works and less of what doesn’t.
It’s a good idea to create a budget for new products and R&D, make sure to keep a record of these activities so that your accountant can claim some tax back.
Reduce the finance costs
If it’s quiet in January perhaps it’s time to review your HP agreements, leases, asset finance agreements, over-draft, loan and other debt paperwork and calculate the overall finance charges for that money. It might be time to consider consolidation.
Join forces and hunt with the pack
One resolution might be to join the Welsh Food and Drink Sustainable Scale Up Cluster. Not only would you get access to free support for tackling some of these issues, but also be able to benchmark your progress with other companies in a similar situation. Ask your team how to introduce, imbed and use key management information in your business or explore the cost of capital through the Investor Ready Programme. Maybe you could save costs and free up working capital?
Have any questions? Speak to one of our Cluster Managers, their contact details can be found here.