Competition is becoming increasingly fierce and the pressure on the company is growing. New competitors and technologies are changing the markets, new sales opportunities are opening up. And the dynamics are increasing: a company that is still well positioned today, posting positive results and has sufficient liquidity, may face unforeseen hurdles just a few months later.
Lenders are also aware of this and therefore place higher demands on the management tools of their borrowers. Those who score points here not only reduce their business risks. They also enjoy greater trust from equity and debt capital providers. This has a direct impact on business through lower interest rates on borrowed capital and better opportunities for loan applications.
However, individual plans are often only made selectively and neither systematically nor regularly. The data used as a basis for business decisions is often not sufficiently up-to- date, because internal bookings are made too late or the company relies on Datev evaluations or those of the tax consultant, which are received too late. It is also not uncommon for annual plans to be drawn up on the basis of the last available annual financial statements (from the year before last!) and planned turnover to be determined without sufficient consideration of market and competitive developments (interestingly, this is often the case with companies whose existence is in jeopardy). The management of the company is then strongly reminiscent of the Titanic in the deepest fog on its way through the Arctic pack ice.
If you want to manage your company professionally today, you need a set of tools tailored to your company’s needs. At the very least, however, the following control mechanisms must be in place:
- Liquidity planning prepared at least on a monthly basis, preferably on a weekly basis, which is derived from the profit plan and is regularly compared with the actual data and adjusted if necessary,
- a detailed profit plan for the company and, if available, for the individual profit centers, on a monthly basis, which covers at least the next three financial years, is adjusted at least quarterly and whose assumptions are based on current accounting data,
- Costing rates in job costing with current cost and overhead rates,
- flexible, reliable order planning with time slices (days, weeks, months) adapted to the requirements of the business.
In addition, it makes sense to systematically evaluate the market and competitors as well as key long-term competitive factors (legal framework, technological development, etc.) and incorporate them into strategic planning. It is advisable to regularly evaluate the company’s competitive position, the behavior of competitors and relevant trends, as well as the wider environment, and thus to set up a strategic controlling system. This enables you to introduce changes at an early stage instead of having to chase after the necessities.
The basis of all these instruments is a functioning finance and accounting system. Entries must be made correctly and very promptly (ideally daily). The dunning process should be automated, structured and consistent, but also include the option of direct contact with debtors and generate suitable data for liquidity and profit planning. For control purposes, it also makes sense to set up cost center accounting, even in smaller companies.
Integrated control mechanisms must also take effect throughout the entire value chain.
Purchasing, for example, requires data on articles, prices and potential and existing suppliers (including their creditworthiness), current or upcoming purchasing processes (with links to order costing, planning and control where appropriate). An IT-based solution is urgently required here.
The same applies to the actual provision of services/production. This requires daily order/production control with comprehensive transparency across all stages of the company’s value chain as the basis for the above-mentioned order planning.
The sales department must not only have access to order planning and control for new orders, but also to costing data and be able to provide customers and interested parties with information on delivery/production data at any time or provide up-to-date, reliable
information in the event of any delays. Modern, mobile information tools can also be used here.
Isolated solutions entail the risk of data not harmonizing with each other, which at the very least leads to frequent misunderstandings between departments, but usually also to the company becoming uncontrollable. With the increasing complexity and size of the company as well as the dynamics of the business, it therefore makes sense to integrate all the necessary information into a suitable ERP system (Enterprise Resource Planning, e.g. SAP) from a single source and to prepare the generated data in a management information system (MIS) for the decision-makers at the top level for control measures.
I support your company in the design and introduction of your new management tools. I will also be happy to work with cooperation partners to implement the IT system or advise you on the best system for your company.