Each head of a company must have experienced the times when all internal company reserves had to be used to increase performance or even save the company from bankruptcy. Our Partner in Kiev, Liudmyla Tymoshenko (Advisor of IFC Project " Development of Agribusiness Financing in Europe and Central Asia"), has been no exception when she headed a multi-industry agricultural company with the critical financial standing.
Huge debts to the suppliers, banks and staff prevented from raising any additional external finance. Therefore, each extra penny in the product price or net cost could be disastrous. So the first thing I had to do was to analyse all production processes and determine their real economic viability. How else can you understand whether livestock should be reduced (instead of being increased), or whether combined feed should be sold (instead of grinding it into flour and baking bread)?
Any decision of this kind must be based on clear modelling of the final situation and additional effect to be obtained by the company. However, as it was found out, no employee of the populous finance and economy department managed to furnish the new director with estimates as to net cost of separate kinds of products, their profitability and, therefore, production cost-effectiveness. Quite the opposite, the necessary information was being provided to the analytical economists with a six or eight-week delay in the form which was of no use for efficient management decisions. Let alone gaps in the human resource data as to labour remuneration conditions, staff responsibilities and their distribution in production units.
As there were virtually no resources to revive the company on the brink of bankruptcy, the organisational structure, production processes, human resource policy had to be improved virtually by hand, proper accounting, analysis, planning and control had to be arranged, and the hired IT team developed an automated management system for all the spheres. All factors of significance for income and loss generation were to be taken into consideration.
Counting Each Animal, Each Seed…
Primary accounting has to be highly reliable and timely. For instance, let’s take the main expense item in animal breeding (60% and sometimes even 70% of direct expenses), i.e. food. It had been written off for years under no control. So, in order to stop that practice, the Food Expense Datasheet by animal groups was introduced (with the food standard per head and quantity of heads by days which was clearly established by the animal technician). Similarly, we started to control the quality of milk, which was written off for calf feeding. It resulted in growth of sales and income. Introduction of the Animal Turnover Register, Animal Yield Recognition Reports, Animal Weight Datasheets, Milk Turnover Datasheets and other primary documents enabled controlling not only expenses, but also product receipt. Moreover, optimising production processes on the farm allowed us to optimise the numbers of the staff and the labour remuneration fund to a certain extent. As each expense item was analysed individually, they were also balanced, and, consequently, profitability of the animal breeding industry was increased.
The Combine Operator Sheets, Grain Turnover Datasheets, Grain Cleaning and Drying Reports, Warehousing Registers, Weighing Registers and other primary documents were introduced in the area of plant production.
The Machine Repairs Defect Datasheet and the Resource Limit Cards for Spare Part Receipt were introduced to control expenses for repairing fixed assets. The first thing implemented at the processing facilities of the company was accounting for consumption of raw materials and product yield by introducing respective reports and calculation cards. Finally, production of certain kinds of finished products was increased whereas production of the others was ceased on the basis of estimates of the real net cost thereof.
Also, introduction of the Document Flow Diagram (a list of the primary documents, a person drafting and signing them, a date of their transfer to a certain accountant and, therefore, entering into the automated accounting database) has enabled tracking turnover of real assets and finished products.
Extracted and translated from http://www.agrotimes.net/journals/article/rozklasti-biznes-na-gvintiki