As the Economy Improves: Keep Your Eye on the Ball

Business Advisors

By Richard McKenna

According to most economic forecasters, the economy will gradually improve through 2012 and into 2013. This improvement may materialize at varying speeds depending on your industry, but overall conditions are predicted to improve.

So, if your business activity has started to improve or has been steadily improving for a while, it is important to “keep your eye on the ball.” Management needs to focus on select business fundamentals in order to benefit long term from this period of slow growth.

What areas within the business deserve management’s attention in order to take advantage of improving economic activity? Here are some of the critical areas that must be monitored regularly as the business climate gradually improves:

  • Core Competencies: Continue to review and examine the strengths of your organization and to leverage your core competencies. Don’t try to execute processes or skills in which you are not proficient. Outsource if necessary or partner with a third party. Someone once said, “Do what you do… and do it well.” 
  • Understand Customer Demand: Talk to your customers. Develop an understanding of what they deem to be “value.” Work with the customers to plan future demand. If possible, develop strategies that limit the variability of customer demand. Try to eliminate any wide swings in customer demand, since inconsistent demand can result in extra inventory. Identify where you can add value to the process or product.
  • Sales and Profitability: Sales and profits are the lifeblood of any organization. Finding new customers or identifying new markets is essential to maintaining growth. Spend time analyzing the sales and profitability data and plot a course that maximizes both. Do not be afraid to educate your customers about the value you provide. 
  • Productivity: It is important that every dollar invested in the business be used productively. Management should implement programs that focus on productivity and effectiveness of resources, both physical and human. Byproducts of business operations such as scrap, rework, lost time, customer returns, machine utilization, downtime and other non-value-added activity must be controlled and eliminated. Prevent issues before they occur and do things right the first time.
  • Inventory Management: Inventory is the same as cash. Management must develop strict inventory control plans and continually manage excess or obsolete inventory. Utilizing a just-in-time approach to inventory is a great way to reduce carrying costs. The relationship between inventory and manufacturing is critical. The use of an effective materials requirement planning (MRP) system is essential in providing the correct inventory to manufacturing when needed.
  • Cash: Remember cash is king. Management must manage cash collections, customer discounts, customer credit and accounts payable. Take advantage of discounts if applicable, and issue customer invoices as soon as possible. Work with the purchasing department to ensure that procurement strategies are in line with cash management strategies.

We all recognize that there is much more to running a business than the items listed above. However, these areas are critical and deserve management’s attention. Failure to properly manage these areas will dampen any growth that is currently underway. Educating the employees about the importance of these items and others will help develop a consistent message about making your business successful.

If you would like to discuss these ideas, or talk about business management strategies, please contact Schneider Downs Business Advisors.


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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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