Simple Management Principles

Five Ultra Simple Management Principles

Simple Management PrinciplesYou have neither the soul of a super-manager nor the skills of a public accountant: here are the ultra-simple principles to appropriate to not be deficit or cash flow. On the menu: fixed costs, cost breakdown, management tools, etc. The Simple Management Principles are as follow;

  1. Limit fixed costs.

In this respect, the key words are lightness and above all flexibility: it is essential to be able to adapt your overheads to your level of activity by transforming fixed costs into variable costs. In this context, the use of subcontracting or leasing are preferred options. In the first rank of the fixed expenses, the salaries and the general expenses, of which the rent of the premises. Two positions to watch closely but relatively simple to contain with a minimum of prudence and modesty.

  1. Break down the cost price.

Break down cost prices so as to identify the most capital-intensive items, if necessary, to take measures to lower them, to control and to be able to adapt the commercial policy to the forecast.

  1. Monitor investments.

Monitor investments, which include equipment and WCR. The working capital requirement, let’s recall, is the sum of inventories and what you owe your customers, less what you owe to suppliers. It is very affected by the acceptance of an important order, which suddenly increases the item “outstanding receivables”. It is therefore a question of learning the capability of the company to face such an opportunity. Many small structures in rapid growth phase do not withstand the explosion of the BFR, even if it is linked to a commercial coup apparently attractive.

On a daily basis, you will not be able to contain it within the limits that you will be set by defining a maximum amount of customer accounts. This limit will help you establish your settlement deadline policy. Even if flexibility can be commercially useful, remember that the longer you give, the more your account receivable and therefore your working capital requirement will increase. Within your own organization, speed of billing and setting up an effective customer re-launch allow to limit the costs. On the supplier side, a certain diversification avoids being caught in too long delivery times and distributes the risks of defection.

Like your clients, the financial health of your suppliers is indeed to watch carefully. Your WCR, will increase. Within your own organization, fast billing and setting up an effective customer re-enabling allow to limit the expenses.

On the supplier side, a certain diversification avoids being caught in too long delivery times and distributes the risks of defection. Like your customers, the financial health of your suppliers is indeed to watch carefully. Your WCR, will increase. Within your own organization, speed of billing and setting up an effective customer re-launch allow to limit the costs. On the supplier side, a certain diversification avoids being caught in too long delivery times and distributes the risks of defection. Like your customers, the financial health of your suppliers is indeed to watch carefully.

  1. Maintain a specific inventory level relative to your business.

This volume must be set so as to avoid both unjustified costs (stocks are expensive) and breaks. Check this level regularly by physical or accounting inventories, for each type of product and also for the products in process.

  1. Other issues to be monitored.

Other points need to be monitored more or less closely depending on the nature of your project. Examples include sales and distribution of revenue by product, distribution method, targeted market penetration rate, purchasing volume, manufacturing lead times, productivity of such or Financial expenses as a proportion of turnover, turnover of staff and so on.