Your Balance Sheet Is Different

There are very few experts who know how to read a balance sheet and tell you where you are going wrong with your strategy. I am training myself in this art for last 16 years. I have been into Internal Audits and reading balance sheets all through out.

I don't read balance sheets to manage an investment portfolio but to know how a company stands to perform in future and where a little tweaking can help it turnaround and produce breakthrough results for its shareholders.

It's a real fun to read a balance sheet if you connect it with the key decisions taken by the management. You can know how management is performing to create wealth for its shareholders.

Interesting aspect about reading a balance sheet and P&L is when you can spot the concern areas quickly that management doesn't know that it doesn't know.

Once you know that there is something fishy, its time to find answers and reasons. Informed enquiries with management along with knowledge of business and processes, helps you to get to the skin of the issues.

Second task is about communicating what you have read to the management and inspire them to do something about it. That 'something' which you suggest will bring forth new possibilities and higher value addition for the management.

My intense knowledge in Management Audits along with my ability to read financials helps me coach the management for creating higher value.

You talk about better corporate governance, controls, planning, resource utilization, revenue generation, revenue leakage, cost reduction, where you will look first? All involves a closer look into financials. Different people look at financials in a different way.

Auditors look at a balance sheet in a different way. When you do due diligence for M&A, you read balance sheet in a different way. When you read balance sheet from point of view of wealth generation, it's a different ball game. It's strategic and it's innovative.

SMEs can add great value if they get their balance sheet read by an expert. It's important they understand the game of wealth generation. The expert spends few hours with you, visit your facilities, factories, offices and of course your balance sheet and P&L and come out with value adding recommendations that can produce breakthrough results involving turnaround of your business, increased cash generation, increased revenue, reduced cost, reduced losses and introduction to new possibilities of growing.

Reading balance sheet in this economic recession is very important. Read yourself or ask for some help.

If business consultant tells you what you already know then kick him out and invite the one who tells you something that you don't already know.

One of our clients increased their revenue by 200 %. Cost reduction achieved 50%. Asset turnover doubled in just six months.

We create future of your organisation. Invite us.

Microeconomics at play

When macroeconomics scenario is not well, it must be a time to focus on micro-economics. Why? Microeconomics deals with individual units in an economy like a firm, a household, an investor, a worker, a single market that makes up the broader economy. It deals with problem of demand and supply of particular goods and services, its price determination and examines how tax cut affects a firm's output. etc.

Microeconomics not only focuses on individual decisions and transactions under a free economy but also enlightens market failures while it tries to model reality at a larger scale. It observes how a country's economy work and finds ways to explain and predict the macro variables like GDP, labor, interest rates, etc.

Scarcity of resources, economic incentives available to individual units or persons within a unit, assessing impact of such economic incentives on the business controls and planning is domain of microeconomics. Microeconomics not only drives business transactions at grass root level but also determines culture and control environment of a business organization.

When all are talking about corporate governance, need of having independent directors, robust audit committees and transparency in financial reporting and disclosures, nobody is talking about an economically viable and sustainable business model post Satyam Scandal or in face of today's deflationary economic conditions.

Many are tempted by 'getting rich quick' schemes but when businesses are not able to grow with such schemes on a sustainable basis than the value created is lost. Many businesses ignore the fact that when they begin to drag their market place into the same sales outlets they shrink their market. Once they start getting confident, they offer guarantees that they can't hope to keep.

Knowledge of micro-economics is very useful while carrying Management Audit that can add significant value. Management Audit with microeconomics can warn you for the bad growth and recommend you to follow principles of sustainable business. When all resources are working at their maximum productivity and demand for the products cannot be further increased, a faulty incentive scheme may put more pressure on the resources and failure is inevitable. When slight volatility or crisis can hamper business planning then it is a time to get non-levered and not otherwise.

Targeted Management Audit and analytics can show the path of sustainable growth and thus optimize use of resources that makes certain that management share and enjoy the products of its labour.

Let's understand as to how analysis and audit using microeconomics can add value in area of purchases.

Traditional purchasing techniques largely rely on volume consolidation and rigorous negotiation tactics. Instead one may use analytically rigorous approach which is built on a keen understanding of the micro-economics of buyer-supplier relationships and can deliver significant savings. It's required to employ a reverse marketing strategy to create an intensively competitive, flat playing field amongst suppliers to exploit a range of analytical savings levers to drive down the prices without compromising specifications.

These savings levers focus on, for example, unbundling supplier pricing, eliminating non-value adding middle-men and gaining a clear understanding of the supplier's economics. The valuable insights from analysis are rolled into a comprehensive multi-round negotiation strategy for generating real savings from suppliers.

You know who can attract best of talents? Answer is the businesses that pay their taxes and dividends on time. Well, there is a connection. It's microeconomics at play.

Breakthrough in Recessionary Risks

You may lose your head but may not like to bow it. Risk perceptions have changed so as the returns and the negotiation process. Negotiations are heated and getting quite messy these days. Is it a time to be more diplomatic or appropriate? Recession has its greater impact when people lose faith in the system. Although system has not failed totally; businesses are not able to breathe peaceful transactions for sure.

Capital resources are funneled in safe projects after due negotiation, competition reduces for challenging and more profitable projects. And, where there is no competition opportunities to create blue oceans exist. Let's talk about some risky projects that are unheard in recent times, which can produce a huge return on your investments.

Are you invested hugely in inventories? What do you think your action plan should be to get rid of the pile you gathered all these days? My suggestion to all of you who are stuck with this pile is - not to find root causes as to why inventories got accumulated but to capitalize on it by pushing it to a totally new avenue or market place. You may scrap it or sell it at discount but there are other opportunities which can be experimented with.

Are you facing a good amount of challenge to recover your debts? My suggestion is to know more about your debtors and their businesses. It's a very good opportunity for you to explore your value chain. There are hidden opportunities waiting for you. You may like to re-engineer the industrial value chain and thus create higher value. Returns can be enormous.

Now talk about capacity utilization in your industry. Many times it is not easy to utilize your excess capacity when there is no demand. Now there are opportunities to create demand internally and thus remove bottleneck in your value chain. Many people are not able to deliver where as many find it difficult to utilize their capacity to fullest. Go grab the opportunity.

Are your investments valued below your purchase price? Many think that option is to minimize loses or wait till the arrival of good times. Now you are not realizing that the above options have hidden opportunities as otherwise it is impossible get rid of such investments. Let' take example of real estate. I think there is huge opportunity in real estate. Industry as a whole needs to understand that this is a right time to commoditize the product. Its time to sell volumes and increase supply as you may notice that all the Companies in real estate segment follow more or less the same strategy. It's a time for them to create new market space by following blue ocean strategy.

Recession is not all evil, but brings with it a lot of opportunities too and the one who has proper insight can bank upon these opportunities at the right time and create value for the business. A real entrepreneur takes right advice to plan its resources and assets for creating higher wealth for himself and the society. Breakthrough is possible for sure.

The Cost Reduction

Suddenly every one is feeling that their cost structures are inefficient. Everyone is feeling that they are overstaffed. Are economic activities within their businesses slowing down? Is there less work? Are employees sitting idle? Were they sitting idle before the current economic situation?

All business organizations now-a-days are using technology to manage their resources. Their systems are integrated to manage various management functions and enterprise wide resources so that optimization and improvisation can be ensured.

R&D departments are developing new products. Innovations and new management techniques are under development. Many of these developments will be breakthrough technologies, products and techniques.

New technologies are our future. This is a time for preparing ourselves for the greater challenges and achievements of tomorrow. We are seeing bad times and bad time will continue for some more time as predicted but thereafter we are going to enter a totally new world.

Slowing down is sometimes good. It provides us time to think. Think about the opportunities, we were not looking at. It provide us chance to self introspect. It allows us to do SWOT analysis in a fair and realistic way.

Our knowledge about our businesses and processes needs streamlining. More focused approach to business execution is required. It is a time to think about talent who will bring real value to business. Real talents will have challenging time to prove their worth.

New leaders will come up to show their talents and their style. They will explore the new world of technology. They will bring about every change that is required and then to become inevitable.

It's a time for new generation to start revolutionary thinking to bring new results. Market has to think differently. Economies will be market driven again but market intelligence will go a sea change. Dynamics will change. Industry structure will change. Cost structure has to be changed.

Cost reduction in this new era will not be about minimizing use of resources or cutting down on investments but it's about finding new alternatives which will bring about better returns.

It's about finding newer avenues for your resources. It's about building new muscles. Non remunerative resources have to be identified for elimination but priority should be to find out new avenues wherein each piece of our resources will prove remunerative.

We need new technologies. We need new leaders. We need new ways to look at our business and the cost structures.

We need to eliminate market inefficiencies and supply chain barriers. All our negotiation has to be win-win. Cohesive awareness in creating industry wide improvement in cost structure needs to be followed. We have to come out of our narrow vision of Value Added concept to broaden our horizon for newer concept of value creation and cost improvements.

We need to adapt to change quickly and mobilization of resources has to be cost effective. Better mobilization without diminishing the value is critical for success and to create positive results.

We have to create newer case studies for our better tomorrow. I wish a prosperous New Year 2009 to every one from Indian and the international business community.

And, those who have been fired. Be an Enterpreneur if you known any exploitable opportunity.

You will see great years ahead. :)