Financial Leadership in 2021
Ernie Neve, CPA
December 22, 2020
We’re closing out a crazy year and as we send it off, I wanted to beat everyone to the punch about making the most of the new year.
I wanted to discuss something I’m passionate about – finances – and cross reference those into an even bigger piece – leadership.
We’ve all had to learn to stay competitive this year, but many of the business owners I’ve spoken with have looked only internally for those changes.
I want to propose you turn your view to your partners in business, especially your suppliers, and really talk with them. Don’t threaten to take your business elsewhere, your relationship with them is still very relevant, but think about how you can maximize the value they provide to you AND help to keep your costs aligned.
Just off the top of my head, I can think of four keys strategies you can implement right away, whether these are companies who supply you with raw materials, finished products, or even the software you use…
· Volume Discounts. It’s understood that the more you buy, the less expensive things are, even if it’s only a discount in shipping. One the other hand, you’d be amazed at how many business owners I speak with who have never asked for a discount from their suppliers. Can they say “no?” Of course! Will they? I have no idea, but you’ll never get any discounts if you don’t ask, so what is there to lose? It’s also relevant to look at the overall volume you purchase over time, too. If you buy, for example, 1,000 fence posts each month (and can only store and use that many) and your supplier doesn’t offer discounts on purchases below 3,000 units, you NEED to point out that you are moving a lot of their products due to your high volume quarterly or annually. Explaining to them the frequency of your purchasing and the volume of those purchase might open their eyes to how much you really purchase.
· Just-in-time-purchasing. Here’s another example of how you can work with your suppliers to limit your financial exposure, because you’re only buying what you need, when you need it. The value-add you’re allowing for your suppliers is you’re keeping your inventory low and placing more orders. At the same time, this allows them to budget how much of their own inventory they need on hand and to fulfill – at least in theory – more orders and count on more capital each month. It also keeps more cash in your pocket by not having too much inventory on hand. To use our earlier example, you can’t pay the light bill with fenceposts.
· Long-term relationships. Let’s face it, if you haven’t built long-term supplier relationships, you’re not doing business the right way and you’re wasting a lot of time every month shopping for “deals” that probably aren’t there. isn’t it smarter to not direct your time (which, by the way, has value) into building a relationship with a company that can meet your needs? Do that and then, foster that relationship. You’ll likely be amazed at how much easier it is to get your business taken care of.
· Adding value “upstream” and “downstream.” Here’s where your relationships can really pay off. Can – or do – your suppliers offer training for you or your staff? How about for the end user – your clients? Are there steps they take for other companies that you haven’t thought of that could be used for yours? On the “downstream’ side, it’s no different – where can you add value OR where can your customer take over pieces of the exchange? Remember, this isn’t just about saving money, it’s also about creating the perception of value. Banks, for example, once had tellers handle all parts of the transaction – the deposit slips and so on. Later, those banks involved the customer in those transactions, “letting” them fill out the paperwork. Now, of course, the ATM handles the whole thing. This perception of value may or may not have a cash value, but the result can always be less work for your team.
If there’s one thing we’ve all learned this year, it’s that the businesses that move and adjust fastest are the ones that prosper.
I want that to be YOUR business, too, so let’s dig in! My team and I are always here to help guide you, whether it’s the most basic question or truly advanced retirement or investment strategies.
Let’s make it a great New Year!