Business Changing

Profit and Growth Specialist

BUSINESS COACHING – Two learnings to be aware of (stay away from!)

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Hello… Giving you some fore-warning of things to avoid, via insights that we at Business Changing come across from time to time. When we start working with new clients, we see a lot of different set ups. Two that have had a really negative impact on a few clients we have started working with over the past few years are outlined in this blog…  Important>>> you need to avoid these, as they can be “business ending”…

 

First one is be really careful when you change “system” (talking IT enterprise system etc). Certainly if your current system is a dog, then by all means consider a new system but beware that the next ERP or system that you buy to replace how you run currently can have huge ramifications. I have seen businesses almost come to a stand still due to a poor choice in system. Some clients I have worked with need Business Changing services because of a decision they made prior to talking to us on a system and their choice turned out with hindsight to be poor. Often these system changes make your production slower (as so many steps compared to how you used to do it and the steps are not as “robotic” as promised, so a lot more manual labour needed to get production happening) and also these system changes can make your customers experience worse than prior – for example invoicing might get slower, customers might not like the way the statements look etc. Interesting in one of my first “jobs”, as a youngster, I inherited a finance team that was really poor at allocating debtor payments to the wrong invoices – at the time we were literally losing customers as they were so frustrated with the poor accounts receivable control. Service as seen by a customer is reliant on so many internal factors, all flowing, so back end systems are so important as otherwise you will lose customers potentially. Lesson with systems is make sure you really really think about your decision and you agree up front with the software vendor what you are going to get and have warranties in place if you do not get what you want. Critical.

 

Second one is be really careful how you value your stock… So many companies that we come across value their stock including an overhead component. OK, if it is a few % of the main value of stock, that is probably reasonable (if you have to, better not to!). Some companies though (and as an ex CFO I have thought long and hard about this in previous corporate career) inflate the value of their stock immensely by adding in this internal cost and that internal cost. This has almost brought companies down, literally. Too complex to write about in a blog, but it means that in the short term your profit is inflated (and thus you pay too much tax) and then down the track, you report a lower gross profit % (and $) – all about timing but it is sometimes significant enough to bring a company down. Your chartered accountant (CA Firm) probably does not ask you about “how do you value stock” so the fact they do not ask great detail about how you value your stock should not make you think the way you do it is right… I wonder if your CA firm is actually any good? No disrespect to CA Firms but I find that about 1 in 10 (or 2 in 10 at a stretch) are good for my clients where I would say the CA firm is adding value, rather than just counting the old beans (a whole different subject).

 

Ok any questions on “the above” or any other business issues or opportunities you might have, you know who to talk to!

Cheers all… Contact Zac for business coaching…

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