BETTER BUSINESS
Issue Sixteen, February 2007
In this months issue:
Protecting your business against embezzlement
Technology planning
Maintenance of minimum stock levels
PROTECTING YOUR BUSINESS AGAINST EMBEZZLEMENT
From time-to-time we hear of businesses that have been the subject of internal theft and consider victims to be somewhat “clueless” in allowing it to happen. The reality is that unless proper controls are in place then you are inviting trouble, even from people you least expect it from. HWI suggests the following tips to assist in safeguarding your business from embezzlement: -
- Don’t leave cash lying around unprotected. Keep petty cash floats small, make use of a safe and bank cash regularly.
- Don’t use signature stamps for cheques or pre-sign any. Consider having 2 signatories on accounts but minimise the number of people with this authority.
- Engage in cross training – ensure multiple people know multiple tasks so that people can audit each other’s work. You may also wish to engage your external accountant to conduct random external checks.
- Institute a proper division of functions separating people who receive payments from customers, make bank deposits, sign cheques, reconcile bank accounts and prepare cheques for payment. Doing this provide a checks-and-balance function at your organisation.
- Build a close relationship with any employees that handle cash – this can often dissuade people from theft.
- Conduct background checks on all new employees taking note of any financial problems in the past.
TECHNOLOGY PLANNING
Technology should form an integral part of every business and it is vital to create a master plan, just as you would draw up a business plan, a budget or a marketing plan.
- Design the plan so that it supports your business strategy and goals. Use it to guide technology-buying decisions.
- Obtain the mindset that technology purchases are investments, not costs. If you have conducted thorough planning then your business avoids wasting money on unnecessary purchases or quick fixes.
- Start by determining your organisations needs – list out what currently unsolved problems exist and how technology can help.
- Get an expert to guide you. Technology Tailors (phone 307 8502) have specialists in all fields of information technology and are able to assist you.
MAINTENANCE OF MINIMUM STOCK LEVELS
Maintaining an appropriate level of stock in your business is a critical success factor. The purchase of too much stock causes a drain on your financial resources through the interest on the capital invested plus carrying charges – often amounting to 25% of the original cost of the stock! On the other hand, too little stock can mean customer service is impaired or production is disrupted which in turn impairs customer service further down the line.
Some warning signals which may suggest stock problems include: -
- Stock levels are increasing faster than sales.
- Back orders and lead times have increased significantly.
- There are big variances between actual stock and stock records.
- Production schedules are often disrupted due to a lack of materials.
- Established reorder levels/order quantities are more than a year.
If you can identify with any of these points then we suggest the following corrective measures: -
- Instigate appropriate stock reorder policies to ensure stock levels track with sales volumes.
- Review if it is possible to cull the number of stock lines held.
- Eliminate unprofitable stock lines.
- Carry out random stock checks to compare stock on hand to accounting records – follow up on any discrepancies.
- Instigate better planning with respect to any production runs so that stock reductions can be achieved. Be aware of your production lead-time and consider alternatives to reduce this.
- Compare your inventory mix on a regular basis to identify any unusual trends and help prevent over or under stocking.
UPCOMING EVENTS
FREE seminar: Business Planning: Strengths, weaknesses, opportunities and threats. Wednesday 21st March 2007 at 9am (2 hours), meail Mark at maldridge@hwi.co.nz for details or book online at www.hwi.co.nz.
Disclaimer: Information contained within this document is of a general nature and does not constitute advice. Readers are cautioned not to act or rely on it without first seeking professional advice.
