Conditions Are 'Confidence Sapping'

There is a lot of uncertainty at present, caused by:

•    the world political events (Middle East, Ukraine, Iraq).
•    the slow-down in the Chinese market.
•    the problems the Australian government is having with its budget being passed by the Senate.
•    interest rates will probably remain low for the immediate future.  However, there is speculation that the Australian Reserve Bank Board would like to move the rates up to around 3.5%.  It would be prudent to factor in the potential for the interest rate to rise 1% to 2% during this financial year.

All of this is 'confidence-sapping' and highlights the need for businesses to take into account all of the prevailing conditions and to prepare a budget and cashflow forecasts for the next 12 months, in recognition that the economy is sluggish with little growth.  It's prudent to monitor your cashflow forecasts on an ongoing basis, either weekly or fortnightly, so you're able to react to any changes.

Debtors will again be one of the major areas for concern for most small business operators.  It's recommended that you monitor your debtors' position in detail, at least every month.

With a sluggish economy, businesses also need to be careful about investment in stock and work in progress.

If you would like our assistance in preparing a business plans or budgets and cashflow forecasts, please don't hesitate to contact us.  

Leadership Or Management

Management and leadership are different but complementary.  One cannot exist without the other.  Leadership is best taught within the framework of management.

A useful approach to a leadership session is to ask participants to write down what they do during a working week.  Then, in turn, ask them to read out what they've written.  Record the activities on a whiteboard or drop paper and, through a group discussion, identify which items are people (leadership) orientated and which are more process/systems/procedures (management) orientated.  This will assist in highlighting the differences between leadership and management but, at some point, will have elements of both management and leadership.  It will also illustrate their complementary relationship.

The late Richard Pratt of Visy Industries identified the distinctions as follows: "Managers do things right, while leaders do the right thing."

Leadership is really about the ability of an individual to influence others in a team and within the framework of management practice.  People's personal data, work skills, pay, employment conditions, work and safety records, etc, are managed.  Their aspirations, work satisfaction, morale encouragement, reward and challenges respond to the quality of leadership, exercised mainly by their immediate team leader.  This does not mean that leaders do it all.  Team members are responsible and accountable for their actions within the tasks assigned to them in their work roles, just as much as the leader has to be responsible in his/her tasks.  A case of different roles yet commensurate responsibility.

If you would like to have a discussion with us in relation to the development of a leadership strategy within your business, please don't hesitate to contact us.  

Purchasing A Business

If you're contemplating starting a new business in this current environment, you need to ensure you've done your homework first.
•    Research the business and the market you're trying to serve.
•    Have a closer look at the competitors to the type of business that you will be operating.
•    Have you thought about all of the aspects of commencing a business?
•    Does it suit your lifestyle?  Does it suit your family's lifestyle?
•    Have a meeting with your accountant and commercial solicitor to ensure the business entity has been set up appropriately.
•    If you're buying a business, you will need expert professional advice to ensure you're acquiring everything you're paying for, especially intellectual property and trademarks.
•    Prepare a business plan and a budget and cashflow forecast.  Discuss these forecasts with your accountant to ensure that everything has been thought of, especially:
-    deposits you may have to pay on rented premises;
-    bonds that have to be placed with various organisations; and
-    upfront cash payments you might be forced to pay for the first few months of trading.
•    It's also important to think through how you're going to differentiate your business from other businesses operating in the marketplace.  This can include the development of a unique website and embarking on a regular social media campaign to promote your business.
•    Try to become an 'expert' by offering free advice via blog articles.
•    Talk to your commercial solicitor about the various laws which will apply to the type of business you're going to buy or commence.  Ignorance of the law is no excuse, so you will need to make sure that you are aware of the laws which will apply to your business operation.
•    Before you buy the business, have a good look around as to what's happening in the business community.  You can achieve this by going to Chamber of Commerce meetings and other industry/business meetings to ascertain the general feel for what is happening.

To be successful in business, it's very important that you set up a team from the very beginning.  You may not be big enough to employ the team on a full-time basis, but you could enter into part-time arrangements for ongoing commercial legal advice, accounting advice, etc.  This could be offered as a Chief Financial Officer (CFO) service, sales/selling advice, marketing advice, information technology advice, etc.

If you are contemplating starting a business, we would be happy to conduct a complete overview on the strategies to adopt, to establish your business operations.  Please contact us for a discussion.  

Characteristics Of A Well Run Business – Part 12

Well-run businesses have systems in place to ensure ongoing advice is received from selected professional advisors, including:

•    Regular meetings (eg monthly or quarterly) with your professional accountant to analyse in-depth current trading figures, cash position, emerging taxation liability and Personal Property Securities Register exposure due diligence review.

Some businesses successfully retain their accountant as a Chief Financial Officer (CFO) on an ongoing basis for broader business operational and survival matters, not just the preparation of an annual tax return.

•    Commercial solicitors can assist by conducting an annual legal review of the business, particularly relating to laws and regulations that apply to this particular business, review of Retention of Title Agreements, Terms of Trade Agreements and other advice relating to the Personal Property Securities Act and registrations on the Personal Property Securities Register (PPSR).

•    It's a good idea to have quarterly or half-yearly meetings with your banker or financier, to keep your banker or financier informed of ongoing developments within the business.  At these review meetings, current financial accounts, including debtors' aged analysis and updated budgets and cashflow forecasts, could be part of the information that is submitted to the banker or financier.  

What's It Mean?

Kaizen – Kaizen is Japanese for "change for the better" or "improvement".  A business philosophy of continuous cost reduction, reducing quality problems and delivery time reduction through rapid team-based improvement activity.  Kaizen is all about moral training, encouraging people to clean up their worksite and to improve their production targets.

Kanban – Kanban is a Japanese word for "sign".  Kanbans are typically a recorder card or other method of triggering a pull system based on actual usage of material.  Kanbans are attached to the actual product at the point of use.  Kanban cards have information about the parts (name, part number, quantity, sources, designation, etc) but cards, boxes and electronic signals can also be used.  Squares painted on the floor to indicate storage or incoming areas are frequently but mistakenly referred to as 'kanbans'.

Lean Manufacturing – Lean manufacturing is a business practice, characterised by the endless pursuit of waste elimination.  A manufacturer that is lean uses the minimum amount of manpower, materials, money, machines, space, etc, to get the job done on time.  

Government Grants For SMEs

Types of businesses that can apply for a Business Evaluation
The Entrepreneurs' Infrastructure Program has commenced, with Business Evaluations being offered over 11 industry groups.

Within each industry group, there is a fairly wide segment of individual types of businesses that are eligible to apply.  In this edition, we are commencing an overview of the various types of businesses that are eligible to apply, under the various industry classifications.

To be eligible to apply for a Business Evaluation and, subsequently, for a Business Growth Grant, the business must be conducted by a company or a company acting as trustee of a trust.

•    Minimum turnover of $1.5 million, maximum turnover of $100 million.
•    Applications can be made by any Australian-based company that provides or has the capacity to provide defence-specific goods or services in a supply chain, which leads to a Department of Defence, either domestically or internationally, is eligible to apply.

Energy, Water and Waste Management
•    Minimum turnover of $1.5 million, maximum turnover of $100 million.
•    This category applies to:
-    businesses that provide services for the generation of energy from renewable and low carbon sources;
-    businesses that supply equipment and technology use and to reduce energy demand or increase energy efficiency; and
-    businesses that provide services in waste management, recycling, environmental assessment, monitoring and remediation.

Creative Industries
•    Minimum turnover of $1 million, maximum turnover of $100 million.
•    Applies to businesses that provide services through:
-    Design   
-    Photography   
-    Film
-    Publishing   
-    Visual Arts   
-    Performing Arts
-    Software Development   
-    Television   
-    Music
-    Writing   
-    Radio   
-    Games
-    Architecture   
-    Advertising   
-    Interactive Content

If you're operating a business which, you believe, may be eligible for a Business Evaluation, please contact us and we'll make contact with the Entrepreneurs' Infrastructure Program's business advisors.  We'll continue this eligible business overview next month.  

Everyone Has 1,440 Minutes A Day

Time is one of those things which cannot be expanded, however it can be better managed.  Every one of us has 24 hours or 1,440 minutes per day.  Some business people are better managers of their time than others.  Business people need to allocate the number of hours per day that they are prepared to spend at work and then prioritise how they are going to spend that time.

Managers need to consider a lot of things when allocating time covering:
•    technical issues:
client/customer work
•    management issues:
team leadership
controlling operations
developing new products and services    
raining and development    

How do you better manage your time?  Here are some suggestions:
•    Establish daily and weekly priority goals/"to do" lists.  Mark off the task when it's completed and periodically prepare a log sheet of the amount of time you spent on various tasks.
•    Control the telephone.  Do not allow the telephone to control you.  Perhaps you could have messages taken during the day and then have very specific time allocations to return telephone calls (e.g. one in the morning, the other in the afternoon).  Have a "quiet period" each day so you can use the "quality time" to plan your daily activities and business strategies.
•    Consider and analysis those persons or tasks that cause you to waste time.  Can you change your management style to overcome these time wasters (e.g. it might be better if you visited others in their offices or business premises rather than meeting in your office?)  The visitor can close the meeting and basically leave.
•    Meetings.  All meetings should have an agenda and should start and finish on time.  At meetings, ensure that minutes are taken and distributed and follow these up at the next meeting.  If this type of activity continues at all meetings it will speed up the process.
•    Delegate.  Is there anything currently on your desk or work area that could be delegated to someone else in the organisation?
Management of time is essential if you wish to be successful in business.  Effective management involves planning, delegation and eliminating bad time wasting practices.  Remember, everyone is allocated the same amount of time each day.  How you effectively spend it will have a significant impact on how you perform as a business person.  

Elimination Of Waste Is A Key Management Challenge

Waste is defined as anything within the process, people or structure that is wasteful, including space, time, parts, people's potential and more.  Management needs to observe what's happening on the workshop floor, shop floor, office, hospital, surgery, etc, to get a full understanding of the potential for waste reduction.  There's no use worrying about tomorrow when you cannot identify today's waste.  Businesses need to monitor the way the business is operating so the entire team develops the ability to observe waste in the workplace.  Customers ultimately won't pay for waste.  The business strategy should be to eliminate waste, improve customer satisfaction and improve profitability.  It's generally accepted that there are seven major waste areas.  These are:

Over Production
Over production is caused by producing goods over and above the amount required by the market.  Getting ahead of demand results in extra raw materials, labour and storage being utilised.  There's a greater chance of damage, deterioration or obsolescence.

Waiting (Delays)
Such as:
•    operator waiting for components or materials;   
•    waiting for instructions; and
•    waiting for set-ups or changeovers of production flow;   
•    parts queuing, waiting to be processed.
•    waiting for breakdowns to be fixed;    

Management should ensure that when allocating where a job is to be set up, consideration has been given to the next job at that location, particularly if the location allocation is going to involve excessive movement around the workshop.

Extra processing
Inappropriate or excessive processing, which does not add value to the customers.  Performing work that provides no additional value to the customer.

Excess inventory increases costs.  For example, cost of capital tied up in materials, extra handling, consumes materials that could be used for customers' orders.

Unnecessary Motion
Any movement that is not adding value includes the movement of parts and operators walking from one station to another to find materials or tools and equipment.

Costs involved in rejects or reworks, downgraded products and refurbished items.  Can the work process be changed to reduce defects to nil?  Management should be closely examining the quantity of defects each day and mentoring the team members on how to reduce the quantity of defects being produced.


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