In 3 months you will know where you are losing money. And where you can earn more.

Centralising management limits efficiency and growth. Owners often step in on every issue, undermining their own managers. When you get into other people’s decisions, you end up unintentionally weakening your own company. But you might say: “I have to do it for the good of my business!” Let’s think about it for a moment.

In traditional structures we see organisation charts with the various functions (purchasing, sales and so on) delegated to different managers. But here is the point: these structures crumble without clear and, above all, shared objectives.

What is the solution? As a business owner you must delegate not only functions (that is, who has to do what) but above all the objectives to be achieved.

What is our approach? We involve the business owner and their team in Management Committees, led by one of our experienced professionals. We turn the accounts into responsibility centres, jointly defining and monitoring the cost and revenue targets to be achieved. We turn family-run management into a managerial organisation, because success is the result of teamwork.

Underestimating the strategic importance of controlling stands in the way of achieving objectives. “We already analyse the financial statements” or “we already do a budget”, the business owner replies when you ask whether they do it. “We already have the software we need”, reply those who go so far as to confuse controlling with the company’s management software.

Power is nothing without control, as a well-known TV advert used to say: the same is true in business. Analysing the financial statements is important, but it is already water under the bridge and does not help predict what may happen in the future. Doing controlling well means looking ahead, to govern future margins before events unfold.

But even the budget is not enough to look to the future, because it is a static tool and is often forgotten in a drawer. Budget forecasts change along the way, based on the actual figures recorded over time: every cost and revenue item forecast at the start has to be recalculated, because it will have a new impact on the year-end result.

What is the solution? The Rolling Forecast is the only tool that can dynamically re-project the budget’s static estimates over time.

What is our approach? We draw up the Profit and Loss Budget, defining the cost and revenue targets to be achieved and the people to whom they will be delegated. We prepare the Rolling Forecast with the algorithms of our Simulator, so as to estimate also the costs and revenue that the budget could not foresee.

Revenue matters, but it does not tell you how big a company is. Business owners often compare themselves on turnover: those with a lot are considered big, those with little small. The true measure is profit: you can earn more even by cutting sales of what does not generate added value.

What is the solution? Break Even Analysis determines the minimum turnover needed to cover all costs, better known as the Break Even Point. The focus thus shifts to costs and revenue takes second place: understanding and optimising the cost structure is in fact what allows you to set turnover targets.

What is our approach? With our Simulator, for each future month we compare the Break Even Point with customer orders and forecast sales. We are therefore able to tell whether turnover targets are achievable and what corrective action to take.

But what does reaching the Break Even Point mean? It means that new turnover no longer has to cover fixed costs, and sales margins can be adjusted for new customers or new markets.

Cost control is not a priority only when turnover falls. Business owners often cut spending when sales drop and, as soon as the market picks up again, forget all about it. Nothing could be more wrong!

What is the solution? Never losing sight of spending items helps reduce the Break Even Point, that is the minimum turnover needed to cover all costs.

What is our approach? By analysing the historical series of accounting data we understand how fixed and variable costs move. We act on raw material costs, by optimising purchasing or outsourcing the production of lower value-added products; on personnel costs, by reducing overtime, using up excess holiday and avoiding unnecessary hiring; on industrial and operating costs, through careful management of consumables, processing work, transport, maintenance and insurance; on overheads, by reducing telephone expenses, consultancy fees, bank charges and sundry expenses.

Raising selling prices indiscriminately can lead to a loss of turnover. When the market fluctuates, because energy or raw material costs rise, the business owner faces a crossroads: raise prices, at the risk of losing customers, or absorb the higher costs and make a lower profit?

What is the solution? The weight of raw materials in each product sold determines the profitability of each customer. The business owner can thus raise prices selectively, concentrating on the products that earn little.

What is our approach? Even without cost accounting, we analyse the bills of materials, that is the “recipes” of the products. By comparing them with sales we calculate the raw material cost percentage of each product sold. In this way we will drive turnover in the high value-added lines, where raw materials weigh less on average; for low value-added products, on the other hand, we will be able to raise the price without the risk of losing the customer. But we will also be able to optimise raw material purchasing or outsource production.

For those who already have cost accounting in place, the benefits are even greater: our controlling system, with Budget and Rolling Forecast, generates even more reliable estimates.

A superficial knowledge of costs undermines the validity of sales quotations. Business owners often prepare offers reasoning only on the average production cost.

Let’s take an example. The average cost of producing moulded plastic items is €20 an hour. The company, however, has automatic presses, which mould large quantities, and manual presses, which mould small ones: the production cost ranges from €16 an hour for the automatic presses to €24 an hour for the manual ones. A business owner who lacks this information uses the €20 an hour average to make offers to customers. Prices will be competitive for the manual-press products, because they are too low, and out of the market for the automatic-press products, because they are too high.

What will the result be? Low turnover and high inefficiency, because the manual presses mould small quantities and are more complex to manage.

What is the solution? The right way forward goes through an in-depth analysis of production costs.

What is our approach? We introduce cost accounting, to know product or job costs, and we determine the cost rates with spreadsheets or by building it into the company’s management software.