Author: Dato’ Dr. Chua Hock Hoo, Executive Chairman, Cheng & Co. Group
MCO has been over for a while now. Business is picking up. However, inflation surged globally. Prices and costs of doing business are going up. If you’re looking for ideas on what you could do in order to better your chances, you’re in the right place as we’re sharing a few great hints on what you could do to help yourselves.
Good Business Practices To Adopt
There are no cures, only treatments, and only after diagnosing the patient. Still, general good habits and advice are there (e.g., various exercises to stay in shape), and are useful to help you stay healthy.
The same exists in business. We’d like to share hints on the following practices for you to consider adopting in running your businesses:
Strict Receivables & Cash-Only Policy
We cite ourselves as an example. During the recent Pandemic, Cheng & Co Group implemented the PM4COVID policy in order to: recover all outstanding amounts from existing clients; and ensure that future outstanding are settled promptly and on time. The result was that we were able to continue operating at our best, even as the economy was being hit hard by the MCO.
Billings for Additional Services
Like credit extended to your customers, additional services have been part and parcel of customer service, which means that it’s given to customers in order to foster brand loyalty. We aren’t arguing against it.
However, the cost of providing such services should be taken into consideration. Whilst there isn’t anything wrong with providing value-added services to customers in order to help retain them, it wouldn’t be economical nor cost-effective if it means giving your customers a carte-blanche into getting whatever services they feel they need, while leaving you to foot the bill.
Therefore, we recommend, like the strict receivables policy, that you also set strict policies that tells your customers and staff alike what services or tasks may be provided free of charge, and under what conditions. Strict policies require strict enforcement.
Hence, on any occasion where services being requested do not fall within the category of free of charge, you ought to set sufficient procedures and internal control to ensure that such requests are appropriately charged and serviced.
There are several ways to price one’s products. Among the most common is cost-plus pricing, which involves adding a mark-up percentage on top of the calculated cost of the product.
Value-based pricing basically prices products according to the value that customers attach to the product. The disadvantage of this is that it’s possible for customers to value your product below cost.
However, as your customer is free to accept or reject your offer, you are also free to accept or reject the customer’s offer. The best advantage of that this form of pricing to offer to our client is that it may better reflect your cost, meaning not just those based on invoices, but also hidden costs such as risks that our clients incur by taking on such a job, and also, just as crucial, the amount of company’s time spent on servicing a particular client.
Putting good receivable policy, good charged-additional-service policy, and effective value-based pricing together, our clients would stand a better chance in having a sustainable revenue and cash flow pipeline.
Business Process Reengineering (BPR)
BPR isn’t a new thing. It has been around for decades. BPR, or sometimes called business transformation, essentially involves taking a process or a set of processes apart, and then re-designing them with the intention of achieving at least a minimal level of output, but only within the acceptable level of cost.
It requires detailed analyses and studies of the operations, and identifying areas of the processes that could be eliminated and/or improved. The effect of a successful BPR is a steady reduction in cost, and cash outflow associated with the operations in question.
Digitalising Your Businesses
ICT has provided us with tools connecting us to each other and the world, enabling even our work to be connected. The benefit of this is that it enables previously siloed related activities to be managed collaboratively to produce outputs that were intended.
On a daily basis, your business processes churn out tons of data. These processes are so different from one another (i.e., think accounting and marketing) that it’s difficult to make sense of them in order for you to have reliable, overall reporting of your business activities.
The good news is that solutions exist, and one, in particular, is ERP (Enterprise Resource Planning). An ERP solution is a software that integrates the data flow from different business processes, enabling you to churn out a comprehensive report, especially on costing and inventory.
In addition to ERP, there is also MES (Manufacturing Execution System). MES integrates all processes in your manufacturing operations to allow for real-time monitoring of all aspects of your operations, including output and machine status.
The data are communicated to managers and key staff in a dashboard format, enabling users to spend less time interpreting data, and have more time to decide on needed actions to improve processes or rectify any foreseen problem.
It requires a little spending to get into. However, it’s possible to manage the cost, if you. However, provided that accurately-forecasted revenue figures are well above the cost of a solution, it isn’t merely an improvement, but also a path towards sustainable growth for a business.
To recap, sustainability is growing your business at a steady pace, without major hiccups. You might face major hurdles to remain sustainable in 2023. However, by no means are you necessarily doomed to fail, for options are available to you to sustain business growth.
Among the choices available are the following:
This blog post is an excerpt from The Connection E-Magazine: SMEs Sustainability in Malaysia 2023.