Insight Associates - Finance Director, monthly management accounts, payroll, VAT returns, statutory accounts & compliance and business planning.

Call us on 0800 180 4265

Business Hub - Helping any one in business succeed

Insight Podcasts Archive

< Back to the podcast archive

This podcast selection is taken from a series of Business Hub radio shows broadcast on Star FM between February 2011 and October 2014 with advice from basic book-keeping through to crowd funding, directors loans, cashflow and a whole lot more!

There's something for everyone so do feel free to download and share - it might just be the golden nugget of information you need for your business to succeed!Listen at Star 107.9 FM

Listen to previous shows here.

Business Trouble - your choices

Have you really got a grip on your numbers?

The Business Hub Show - 10 August 2014

Download this podcast (right click to save) >>

On the business hub show this week Steve Elsom asks Garry Mumford to explain about numbers efficiency and how this relates to manufacturing…

Garry

A good starting place here is if you can’t measure it you can’t manage it.

  • It is my experience time and time again that despite business owners and managers believing they have, they rarely really have a grip on their numbers. This position is made all the worse in a manufacturing environment where product costing becomes key.
    If you are buying product then selling it you have a very clear idea on your costs – but if you are making it from numerous different cost components do you really understand how that cost is made up?  Most don’t?
    Often an exercise was done some time ago to form a basis for sales pricing, but it is invariably out of date and also takes a fixed point in time without taking into account the issues of fixed and variable cost elements and real movements in the businesses profile (product mix etc.).
    This in turn leads to issues with poor margins, a lack of understanding of what the selling price really should be, and how to control the costs.
  • Fixed and Variable costs
    It is critical that any manufacturing operation has a thorough understanding of its cost base and the components that are fixed and those that are variable.
  • Shop floor data collection
    Many manufacturing operations have elements in their process that are variable based on productivity and other factors including perhaps usage and waste. Systems need to be in place no matter how rudimentary to collect this data and analyse and understand it.
    What for instance is the impact on manufacturing costs and productivity of an efficient operator over a less efficient one? Or the ease of making one product over another which might consume a lot of time because it is awkward and creates issues with the machinery or processes.
    Management need data and information in order to understand these and drive such issues out of the process and as a result reduce costs.
  • Stock control
    Another area that needs to be properly understood is stock control. Holding too many of the wrong items and not having any good control over the stocks held can play havoc with manufacturing productivity as well as tying up cash. A strong computerised stock system that measures ages of stock, and reorder points etc against manufacturing demand is critical. This can ensure only the right levels of stock are held for the right lines.  Again this needs to be managed not just allowed to happen!
  • Management Accounts
    Generally management accounts in a manufacturing operation tend to be more complex and detailed. Not only do you need to understand and analyse the overall company performance you also need to understand why that is the answer. What products lines are being produced and what are being sold? What are the cost bases of those products? What are the cost bases of the various departments in the business and how are they changing?  The list goes on.

Steve

What 3 things can an SME take away from our conversation today and say I can do that better in my business?

Garry

  • Stock
    Do you absolutely know that the stock you are holding is the absolute bare minimum that you need to hold to make your operation efficient?
  • Variable/Fixed cost
    Understanding the balance between your fixed and variable costs. Really understanding your cost per product and constantly keeping that under review. This will strengthen your pricing position. Are you over-recovering your fixed overhead?
  • Cash
    Is the key thing – think about your credit terms and how you will buy the product in, the cost of holding stock, labour, how will you get paid?  What is the cash cycle?

Steve

Looking into your crystal ball what can we expect in 12 months’ time?

Garry

My feeling is people are becoming more confident, they want to go forward and grow but are still cautious.  The storm has passed and it’s critical that the smaller business ‘gets up, gets on and grows’. That will build the economy and the environment is right for it - although caution is still good. So growth with the facts in front of you – i.e. understand your numbers.

Steve

You alluded to the storm having passed do you see any more storm clouds on the horizon?

Garry

Interest Rates is the one that worries me.  It’s not a case of ‘if’ it’s a case of ‘when’ and will affect the man on the street as well as businesses.  We need to understand the effect of when the base rate starts climbing. A move of .5 percent to 2 percent is going to double their debt servicing cost.  There’s still a lot of heavily debt laden businesses out there. Banks have been improving their margins to deal with their own balance sheets and new lending is more expensive than existing lending and if interest rates climb as well even slowly it will have an impact.

Steve

When do you think Interest rates will go up? Before the election?

Garry

End of this year – beginning of next – the good thing about the Bank of England being independent is that the decision to raise interest rates shouldn’t be something that is politically motivated. It should be done for the right reasons – but it must be done very cautiously and slowly.

Some businesses supporting a level of debt will feel this pinch but will also feel it with the banks and other lenders increasing their margins.

Steve

So all this makes number efficiency even more imperative.

Garry

Absolutely some of the best ways of solving your need for cash in your business is to improve your cash flow. Look within your business to show that you don’t need that much debt by becoming more efficient in what you do.  What credit terms do you offer your customer? What terms do you get from suppliers? Debtors and stock holding issues. Is there any unused plant you could sell?

Steve

What opportunities do you see?

Garry

Confidence is good and will make people do things.  We’re still cautious so we need to loosen up and take some of those opportunities – both within the UK and export opportunities. The position of the pound will help with that.

Steve

So the advice is Get Up, Get On and Grow, but what should manufacturing businesses be cautious about?

Garry

Cash – it always comes back to cash.

Steve

Manufacturing in this sector accounts for about 11% GDP nationally – do you see the manufacturing footprint in this part of the world increasing or staying the same going forward?

Garry

I might say it’s decreasing actually - certainly areas I can think of few years ago that were predominantly manufacturing aren’t now. Different sectors are moving in different ways. I would certainly like to see more in this part of the world.

Listen to more Insight Business Hub podcasts

Share |