Bottleneck-oriented Business Management

Stephan Szugat Article Title: Bottleneck-oriented Business Management
Author: Stephan Szugat
Word Count: 1,176
Article URL: http://www.abenetis.com/encyclopedia.html
Format: 65 Characters per Line

------------------ ARTICLE START ------------------
Bottleneck-oriented Business Management
Simple and effective Business Management

In every enterprise there are, at every time, one or more
bottlenecks, which have influence to the commercial situation.
Bottleneck-oriented business management has the purpose to early
track the bottlenecks and to remove them, to allow an optimum of
commercial development. To know at any time, what a business
lacks of and to be able to add the missing things, is today a
determining competition advantage. Bottlenecks can be, e.g.:

* low sales proceeds
* high due or overdue accounts receivables
* low liquidity (Cash on Hand, etc.)
* high amount of liabilities
* low number of customers
* too many new customers
* too high capacity utilization
* defective administration or management
* and a lot more.

These example show that bottlenecks not only concern negative
circumstances, but also can apply to positive commercial
development. If an enterprise takes up many new customers, this
results in new orders, which lead to other circumstances, like a
possible excess in capacity utilization. In case the excess of
capacity utilization stays for a longer time, this may result in
a lower employee motivation, because of a slump in working
atmosphere within the company, which then could lead to less
qualtiy of the work performed.

Due to a TIMELY reporting system many companies take care of
reaching the desired commercial development. However, a regular
analysis of expenses or the annual reports are not enough to
control a business today. In the today's dynamic markets these
evaluations are too statical, too much oriented on the past
commercial development, which had been achieved. Also cost
accounting only shows what has happened in the past. The actual
direction in which a business is running could not be seen.

Imagine a business to be a car. If you sat down in a car, do you
like to receive information from the instruments from the last
year or month? Probably not. You would like to have actual
information about fuel tank content, coolant temperature and a
lot more. Bottleneck-oriented business management should exactly
bring the most important and actual information about a business
to you, including so-called early warning signals ( Screenshot abenetis ERS-Diagram).

Data oriented to the past for early-warning-systems?

A working early-warning-system needs data which are not oriented
to the past, like from cost accounting or year-/month-end
closeings. It needs data from so-called early indicators, which
has to be gathered from different areas of an enterprise. Of
course, figures from the finance and accounting department belong
into an early-warning-system, but they only have a subordinated
role, because they are oriented to the past.

Nowadays the reporting must show the present situation of a
business. In many businesses the expenditure of time for the
reporting rose considerably, due to the today's flood of
information. Aggravatingly added to this, is the selection of the
really relevant business ratios, which allow an appropriate
overview of the actual business situation. Too often reports are
prepared, which are not perceived by anybody, due to the lack of
necessary statements about the business development.

There are already proven business-ratio-systems, that enterprises
only need to take over. Get back into the car again, imagine you
have only one instrument in front of you, which shows the value
"35". What does this signify? It is not recognizable how many
fuel exists, how the Temperature of the coolant is or how fast
the car is driving, etc.

At this example you could recognize the little expressiveness of
only one business ratio. It shows the importance to use the right
business ratios, which must have a connection to each other and
which have a different temporal origin. Nevertheless, many
business ratio systems are mostly based on data which originate
from the past.

This turns often to the problem, that immediate information are
not available, to indicate the actual situation of a business.
However, there is still the alternative, to reduce the period of
the past. How would it be with one week instead of analysing
business data every 4 weeks? This would lead to the fact that you
could act a few weeks earlier, if something should run a little
bit inclinedly.

Only very few data are needed to receive an informative
evaluation. This again is comparably with a car. If you are
driving with your car, you only receive a small, well-chosen
number of information and nevertheless, have an actual picture of
the situation. This is also possible for businesses, as well!

As a motorist we receive only one fraction of the data which is
acquired by the system of the car, and just these fraction of
information is enough for us to reach the desired destination.
When traveling usually we are well prepared, but the principle of
the preparations is often neglected in business operation. As it
is with traveling, the final goal has to be clearly stated by the
business management. This could be done by having planing data
available. Only by target/actual comparison divergences of the
commercial development will be recognized.

Unfortunately, many small businesses renounce to use plan data.
Besides, it is not about, to cut plan data into the smallest
pieces, but only to get a rough picture, what the business is
going to achieve. It is absolutely possible to run a business on
the basis of the figures from the previous year, however, to use
these figures, the past commercial development should be taken
into consideration. So the figures from the previous year should
be improved to fit with the new goals. And finished are the
planning data and the basis for an operational risk management
are laid. Still if it is most important to know the actual
bottlenecks in business operation.

Recognize problems and act!

One of the most important factors in business management is the
early recognition of problems and potentials. There are
bottlenecks in every business, which could have serious results.
Pecuniary difficulties could lead to bankruptcy for example.
Therefore symptoms must be recognized early, in order to turn a
possible crisis away and to secure the future of your business.
Also to use available potentials, regular analyses should be
done. Nowadays products and services could not be sold forever,
because product cycles become shorter and shorter due to market
dynamism. The recognition and development of potentials is
exceptionally important, to avoid losing the already achieved
basis of a business.

To asure an easy and effective business management of your
company, you will find reports, checklists and on-line analysis
( Screenshot Strategic Balance Analysis) at our Internetpages
to help you to be always informed about the actual situation of
your business. Bottleneck-oriented Business Management is
suitable for every business.
------------------ ARTICLE END ------------------

About the Author

About the Author:
Stephan Szugat is founder of abenetis a web-based service about Business Management Solutions focusing on the core needs of business management. He has approx. 15 years experience in the Finance and Accounting Area from companies of different size and from various industries. http://www.abenetis.com