Tips from the Big Chair
Welcome to a treasure trove of wisdom from the desk of Paul J. Updike, the President of EFM Consulting. With a distinguished career in financial management and a passion for empowering businesses, Paul has amassed a wealth of insights to share with aspiring entrepreneurs and seasoned executives alike. Here, you’ll find a collection of invaluable tips and strategies curated by Paul himself, crafted to guide you through the intricacies of financial success and business growth. Embrace the knowledge from a true industry leader and discover how his expertise can propel your ventures forward. Soak in the wisdom, implement the advice, and witness the impact as you embark on a journey towards unprecedented achievements.
Tip # 1 – “The three most important things you need to measure in a business are customer satisfaction, employee satisfaction and cash flow.” Jack Welch, former CEO General Electric Company.
Tip # 2 – When selling a product in a capitalistic economy, you are actually selling a combination of three things: price, quality and service. Customer can buy only two out of these three at any given moment. Any two out of these three, but not all three items at the same time. Successful businesses have the responsibility to help each customer accept a compromise on the third item. Otherwise, customers can put you out of business.
Tip # 3 – Avoid analysis paralysis by having an action orientation —ready, fire, aim! Once you have determined who, what and approximately where your target is, start firing. The data your company needs to analyze comes from scrutinizing close misses, not from theoretical musings. (Tom Peters in Search for Excellence, Chapter 5).
Tip # 4 – Selection process – get the right people on the bus. When in doubt, don’t hire – keep looking. (Good to Great, p54, Jim Collins)
Tip # 5 – Cost accounting systems are built on a set of business assumptions. Every cost accounting system, no matter how adequate, needs to have its assumptions monitored and checked continuously. People come and go, overhead structures change and products are added. Because each business changes and evolves over time, each cost accounting system needs to be compared to actual costs at least every six months.
FIVE WAYS to INCREASE PROFITABILITY by USING EFM, without INCREASING SALES.
#1 Increase your Margins. Do you know which products and services improve your bottom line best? When a customer wants volume discounts, will your cost-accounting system give you your true costs? EFM can install an activity-based costing system for you.
#2 Improve Efficiency. Is your shop floor information accurate? Does your estimating reflect reality? Has your job-estimating model kept up with innovation? Do you know when management should intervene on the shop floor? EFM can create meaningful, daily reports.
#3 Reduce Waste. Which machines and which operators make you money or which cost you money? Do you understand customer specifications before you start producing the job? Are your employees using your installed software correctly? EFM can tailor your shop floor software to fit your firm’s needs.
#4 Purchase Smarter. Do you buy materials in the right volume? Do you buy quality supplies? Is your relationship with your suppliers and with your bank good enough to allow you the capital you need to purchase the correct amount of materials? EFM can provide critical, decision–making information.
#5 Price Your Products & Services Carefully. Does the interplay of supply and demand always determine the price of your products? EFM can increase your economic IQ by teaching you to ask the right questions.
FIVE IMPORTANT BUSINESS PRACTICES
1) Improve your relationship with your bank. Give them accurate and timely financials to make sure you have all the capital you need, in advance. EFM can help extract accurate information.
2) Save time by simplifying. Sort the information into two piles – A) critical information, B) unimportant. Then ignore pile B. Avoid information overload! EFM will help you decide which information is critical.
3) Practice smart collection policies. A) Contact your customers frequently; B) Customer must receive exactly what they ordered; C) Agree on payment terms prior to doing business; D) Resolve all claims and credits immediately; E) Follow up on every customer commitment to pay a certain amount by a certain day. EFM will standardize your cash-flow efforts.
4) Get and keep the customers you want. Determine the combination of price, service and quality that your production offers, then become world class in your market niche. EFM can help you adjust your business model to make more money.
5) Update critical cash flow information daily. Know exactly who you owe and how much you owe and who owes you and how much they owe at all times. Keep your promises and help your customers keep theirs! EFM will customize your cash-flow reporting.