On a daily basis the amount of care we give to the human body is remarkably little. When you are feeling good the best the body can hope for is a good wash, a brush of the teeth and a slap of moisturiser if you are a bit of a girly. What else? Haircut and manicure perhaps oh, and possibly a check on your weight.
Considering the complexity of the human body and how we cannot live without it we do not spend too much time analysing how it is performing. We probably spend more attention on our cars or IT gadgets. “Why is my PC running so slow? The car is overheating, I must check this quickly.” Such symptoms are immediately of prime importance and top of mind.
This all changes when we are unwell. Suddenly we are taking our temperature, blood pressure and pulse rate. Blood tests may be needed. You may be wired up to monitor to see how the heart or brain is functioning. Now the body is getting the intensive care it needs. Recording and monitoring the raft of data is the route to a hopefully full and speedy recovery.
If your FMCG/Brewing/Pharma business is operating well and there is even some growth then the usual “heart monitoring” Balanced Scorecard KPIs are reported weekly or monthly. The focus is usually on getting your “stuff” onto the shelf at the right time, in the correct quantity at the lowest cost. Along with other company measures the scorecard shows the health of the business.
When all is not going smoothly however, the Balanced Scorecard may need supplementing with other measures. In companies where sales are below expectations and cash flow has dried up you need intensive care focus in that area. This does not mean you stop generating the Balanced Scorecard as this will contain important financial and non-financial measures. Instead, you need to place the sensors in the critical locations.
For businesses struggling with cash flow here are some relatively simple Recovery KPIs you might consider.
- Sales-out – Sales-in do not guarantee you a final sale to a consumer so focus on the final sales transaction.
- Discounts – Control how much discounting is taking place. Is it authorised and at the correct level?
- Debtor Days – This is money owed to you so negotiate favourable terms and constantly review. If 60 days has been in place for years then it is about time this was challenged.
- Creditor Days – You owe this money but if you upset suppliers they will stop supplying! Renegotiate where possible and do your best to pay on time.
- Overdues – Where money is due to you and has exceeded the agreed terms you need a “persuader” to get on top of late payers.
- Forecast Accuracy – Do not look at every single sku. Determine which skus are actually important and make a healthy profit and focus on them.
- Lost Sales – Investigate every significant lost sale and systematically apply a “100 year fix” so mistakes do not recur.
- Potential write off – Monitor stock age internally and at distributors and avoid this criminal cash drain.
- RM/PM stock – If you are overstocked you should not re-order and you might consider selling some items. Your stocks should be aligned with those important skus identified above.
- Finished Goods stock - Again, ensure your key skus are always available in the required quantities. Promote any excess stocks to collect income and minimise potential write off.
In addition to the sensible tight control of discretionary spend this approach can stabilise your vital signs and guide you back to health.
