During turbulent times, companies do more with less. For your business to develop winning ways during these challenging times, benchmarking is a very effective way of staying ahead of your competitors.
Benchmarking takes financial figures from your accounting system and converts them into ratios, which allows you to compare your results to those of your competitors. These figures are usually expressed as a percentage of sales or profits, before abnormal items are taken into account.
Benchmarking is working ‘on’ your business rather than ‘in’ your business.
So this week’s tip is all about improving your cash flow through effective stock control.
Here are 5 areas to examine in your business:
- Stock levels – do you have a system, such as MYOB with inventory processing, for recording your stock movements, in and out? Do you review your stock levels and stock turnover on a regular and on-going basis?
- Incorrect stock – have you got the right products that meet your customers needs? Do you get regular feedback from your customers?
- Warehousing – do you have a large storage space where you are paying rent, that is not needed, when your suppliers are able to deliver in a short turnaround time? Keep your money in the bank not on your shelves.
- Delivery – Are you regularly reviewing your own and your suppliers cost and method of delivery of your product and /or service?
- Shrinkage – Are you measuring your shrinkage, and reviewing ways to reduce this? Are you aware that staff is the main reason for shrinkage?
Over the next 3 weeks, we will continue to look at benchmarking your business and continue examining the various departments within your small or medium-sized business. Additional factors such as finance, planning and management and how they impact on your cash flow.
Reference: Bright Ideas for Small Businesses – how to get your Cash Flowing efficiently, Charisse Gray, 2009.
