Dealers Management Control: a stranger?

budget

Photo by 401(K) 2013

It seems strange, but still today there are dealers with millionaire turnovers, which have Management Control limited only to aspects of the official budget, often managed in outsourcing.

All very useful data, of course, but that underline an already consolidated state; forcing the company, often, for sudden and late solutions.

The main point is that the dealer focused on himself, or on trusted men, all the decision-making power, both at the strategic and operational level; relying on macro accounting records to know the progress of his business.

The principal purpose of the power centralization is the total control of the business but, actually, almost always, it happens the contrary.

To leave this reality there is the necessity, for dealers, to have technical tools of planning to be used as guide and, indeed, to control.

pianificazione

Photo by Luigi Mengato

The management control, generally, is used by businessman to verify, within a specific period, where and how to take decisions to affect the incomes in short term.

*A brief OT on the incomes in short term: be able to manage it with competence means planning the incomes in the medium and long term – avoiding the loss – but this is another story! *

It’s necessary starting from the existing data of the financial reports and, according to the business specs, providing the dealer with simple tools, which can support the management control.

I generally work on two elements:

  1. cost centres for single activity;
  2. fixed costs, in general.

COST CENTRES

No matter how big the dealer or the Service Centre is, there is always the possibility to divide the business in subsets.

The main concept is that to assign the employee/manager a task, which could be weekly, monthly or at most quarterly; update a series of data to monitor the variable costs relating to the productivity of the company.

What” to monitor is linked to the size and the management of the business; clear is that, once a satisfying stability for the dealer is reached, you can change the data to monitor.

It could be interesting even cross-reference the records obtained, for single department, to calculate the productivity based on consumptions or monitoring/improving the supplies.

costi

Photo by HowardLake

FIXED COSTS

When I enter a business, one of the first accounting figures I develop, is a tab of the fixed costs.

From the letting costs, the utilities to the taxes … all that is periodically paid by the business.

I often faced with:

  • utilities, which hadn’t been updated from five years and more;
  • workshop with double-time price list (the night hours with an inferior cost)
  • closed contract with the telephone company but regularly accounted
  • disused switchboards for which maintenance was still paid
  • cloud services never used
  • advertising fees for dismissed activities
  • annual donations to associations and confraternities, without any monitoring of the promised incomes

It’s so necessary an annual calendar to update costs and agreements; but mainly having a monthly tab to monitor the historic trend.

All these activities, once operational, will become assets of the undertaking and therefore the dealer isn’t forced anymore to entrust the management to external consultants.

The Management Control allows the entrepreneur to exercise the planning and control activity avoiding to be necessarily present anywhere.

consulente


Photo by Moleskine Foundation

In other words “if my employees know the reference data of the company they can also make decisions in total autonomy“.

If, instead all knowledge is centred in the hands of one person, without freedom of movement, they will never work by optimizing resources.

In this regard, within the Management Control, it becomes essential to create a quick purchasing procedure.

Purchasers must fill out a form, with a progressive number, which will be attached to the supplier invoice; subject to the refusal of the accounting to the payment of the same.

This procedure, in some cases, has reduced the volume of purchases in the first 3 months from its introduction by 25%.

After the first year we also merged purchases and, having fewer suppliers, we had more discount and more credit extension.

Eventually the Management Control, if well integrated, will have more benefits than the ones for what it has been implemented.

It allows, in fact, the employees to take part in management operations, making them responsible for their choices and increasing their involvement and productivity.

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