5. Gordon Brown, 23 November 2008
CUT VAT by 2.5 per cent to encourage consumer spending.
I'll give help when
INCREASE the state pension by between £4 and £5 a
you need it
week.
INTRODUCE temporary tax cuts for low-income families,
who are more likely to spend and give the economy a boost.
CANCEL planned tax rises on cars and small businesses
and cuts in tax allowances.
INCREASE spending on schools, hospitals and transport
projects.
The rescue will increase national debt to record levels, with Britain set to
borrow up to £120 billion a year by 2011. Taxpayers already spend over
£300 a year EACH just on the interest on national debt.
6. Barack Obama, 25 November 2008
• pump money into the battered
economy
• create 2.5 million new jobs
• a tax cut to the poor and
middle class
• make massive government
investments in energy-saving
and other technologies
designed to pay for themselves
in the long run
quot;will be about $500 billionquot;
7. George Bush, 25 November 2008
• US$800 billion to be spent
• unfreeze credit on student loans,
credit cards and car loans be
returned to normal levels
• stabilize the system and support
the lending that is vital to our
economy
10. Cash is King
In retrospect,
• Was there a day in the past that I did not
have any cash issue?
– Yes.
• Why? When you have sufficient or
more than enough cash, what did you
actually do?
– ………..
11. Where to get money?
• Stockholders
• Bank
• Business
– Profit
– Customers
– Suppliers
– Assets
– Employees??
12. Stockholders, do you have money?
• Yes
– But, why don’t you invest?
– No problem. Can I get back the money?
And when?
• No
– Then, what should we do?
– Fight or Flight?
13. BANK
A bank is a place where they lend you an
umbrella in fair weather and ask for it back
when it begins to rain.
Robert Frost (1874 -1963), US poet
14. 4C principles
• Capacity - the ability of the owner/manager/business,
as lending to a project=lending to the person
• Capability - the feasibility for the project to make
profit and cash flow to pay for the interest and
repayment of principle
• Collateral - guarantee for the loan
• Condition - the market atmosphere on the business
sector
15. It is all a matter of TRUST!
Trust
You &
Your Business
But, why should I believe you?
16. Business
• Profit = Sales – Cost – Expenses
• Customers: A/R
• Suppliers: A/P
• Asset: True Value
17. Where to burn money?
• Operating Expenses
• Capital Expenditure
• Raw Material
29. Value of Assets
遊戲規則 Rules of Game?
市場價格 market price
公允價值 fair value
How to report Asset Value?
– If long term, at cost
– If short term, at market value
– Who knows your intention?
34. Profit & Loss A/C
營業額
銷售成本
毛利
銷售費用
管理費用
營業利潤
財務費用 For a period of times
稅前利潤
所得稅
稅後利潤
股息
本年保留利潤
35. Profit & Loss A/C
營業額
銷售成本
公司整體表現
毛利 Overall company performance
銷售費用
36. A Paradox of Pricing Formula
• Price = Unit Cost + Mark-up %
• Cost: Variable Cost, Fixed cost
• Variable Cost: more output, fixed unit
cost
• Fixed Cost: Lump Sum / Output
– more output, less unit cost
– less output, more unit cost
Solution: Convert fixed cost to variable cost
as far as possible
37. 產品分析 Product analysis
By each product type,
changes in
審核核心競爭力
– Quantity
core competence
– unit price
發現浪費 wastage
– cost elements
38. What big enterprises do
• 控制非增值性的費用﹝差旅費﹞cut
expenses
• 凍薪 freeze salary
• 裁員 redundancy
• 拆賣 disposal
39. Understand costing structure
• 生產成本 vs. 費用
• Production cost vs. expenses
• 變動成本 vs. 固定成本
• Variable cost vs. fixed costs
• 產品盈虧平衡點
• Break-even point
43. Decision & Behavior Model
預估結果
他人經歷 Expected result
Others experience
自身體驗 行為 實際結果
Self feeling behavior Actual result
本身經歷
Self experience
What made me earn money in the past?
45. Alert!!
• Key Performance Indicators
– The higher the index, the better the
performance
• Key Risk Indicators
– The lower the index, the more secured the
business
47. Agenda
1. Financial body check-up
2. Re-identification of core competence
3. Risk management: A/R
4. Risk management: Production & Inventory
5. Risk management: Cash
6. Risk management: People
7. In-depth meaning on Risk Management
48. What is your core competence?
• Product vs. Service
• Product Design?
• Quality?
• Cost?
• Assembly?
• Manufacturing?
• Supply Chain?
49. What is your sales strategy in 2009?
• Selling product or services (what
services?)
• Segmentation / Classification
Market/Product
• Existing Business vs. New Business
– Level of confidence
• Do you have the right people in place?
– If no, then…..
• What is your sales expense budget?
Finish your job; people in China is hungry for yours
50. Projection > Prediction
2008 Gross 2008 2008 net Inc/(Dec) in New (Lost) X Y Z Net 2009
Customers Forecast Rebate Forecast Contract Price Program Program Reason Reason Reason Change Budget
A
B
C
D
E
F
G
H
Total:
Critical Elements: Surprise and Fulfillment
51. Projection > Prediction
2008 Gross 2008 2008 net Inc/(Dec) in New (Lost) X Y Z Net 2009
Products Forecast Rebate Forecast Contract Price Program Program Reason Reason Reason Change Budget
A
B
C
D
E
F
G
H
Total:
只要信, 不要問; 我办事, 你放心!?
只要信 不要問 你放心!?
52. Keep the sales
• Why customers loyal to your company?
• Have you ever got the satisfaction score
from your customers?
• How do your customers look at you?
• Exploration vs. Exploitation
– Sales & Marketing / Customer Service
– Product Engineering (PE)
Make your people happy so that they can make your customer happier
53. Any Derail?
In terms of:
• Products
• Services
• Functions
Who is going to answer the above
question?
55. Derail because of windfall profit
• Building copper products
• Profit from Hedging of copper
commodity
• Over-trading
56. Business Longevity
• Manufacturing to Assembly
• Injection, Stamping, Weaving,
Electroplating, Processing & final
Assembly
• Where is the focus?
57. Trust & Trustworthiness
• What is the basis for trust?
• Check & Balance
• What is the underpinnings of the
business?
58. Agenda
1. Financial body check-up
2. Re-identification of core competence
3. Risk management: A/R
4. Risk management: Production & Inventory
5. Risk management: Cash
6. Risk management: People
7. In-depth meaning on Risk Management
59. Accounts Receivable
• Examine the current situation
• Spot out the customers
• Review the collection strategy and
credit hold policy
• Re-connect with your customers (how
much you know them?)
• Create forward-looking credit control
policy
• Any way to generate more cash from
A/R?
60. Examine the health of A/R
• A/R Aging Report and its history
Gross
A/R
Customer Credit Terms Current Over 1 Over 7 Over 30 Over 60 Over 90 Over 120
Total 0 0 0 0 0 0 0 0
61. • What is the total overdue debt?
• What is the longest credit terms
accepted by the company?
• Any credit terms > the standard term?
• For customers with overdue debts, do
we still release delivery? If yes, why?
• How frequent do you read the aging
report?
– Monthly? Weekly? Daily? Or Never?
62. • Cash Projection
Collection according to credit term
D+1wk D+2wk D+3wk D+4wk D+2mth D+3mth
Customer Credit Terms Current OverDue
Total 0 0 0 0 0 0 0 0
63. • Performance review of Collection
• Any follow-up actions?
Planned Actual
Customer Credit Terms Current OverDue Collection Collection Difference Remarks
Total 0 0 0 0 0
64. • Forward-looking
– Credit Limit Alert Report (Weekly)
• Current Balance + Average Invoice Amount
vs. Credit Limit
• Report generated if it exceeds the credit limit,
alert the customer & salesmen of this would-be
credit hold situation
– Know more about your customers
• From your salesman & staff
• From your suppliers
• From your competitors
• From your environment
65. • Local purchased materials for local
sales
• Imported materials for export sales
• Consignment
– Title of ownership
• Bank Draft
• Fixed cost vs. variable cost with spare
capacity
66. Key Risk Indicators (KRI)
• % of overdue debt / Total A/R
• Top 10 delinquent A/R and amount
• Late Payment customers and amount
• ….
67. When is AR created?
• Sales on credit
– Pass on ownership (擁有權) of the
products
– Pass the ownership risk
• Consignment goods
– Pass on custody (保管權) of the products
– Do not pass the ownership risk
68. Agenda
1. Financial body check-up
2. Re-identification of core competence
3. Risk management: A/R
4. Risk management: Production & Inventory
5. Risk management: Cash
6. Risk management: People
7. In-depth meaning on Risk Management
71. • Clearly identify what inventory can and
cannot be used
• Why are there so many unusable
inventory?
– Re-visit the planning process…
– Any reward for minimize inventory level
without affecting order fulfillment
• Keep it or dispose it? Or sell back to
the suppliers
• Deferred customization
72. Target Inventory
• What is your target inventory level?
• How do you measure it?
Dec-03
Stock Value 8,500
Stock Days 91 days
Jan-04 Feb-04 Mar-04 Apr-04
Cost of Goods Sold 3,253 1,540 3,548 4,500
Stock Value 8,500
Cost of Goods Sold Days
Jan-04 3,253 30
------------
5,247
Feb-04 1,540 30
------------
3,707
Mar-04 3,548 30
------------
159
Apr-04 4,500 1
------------ ------------
- 91
74. Tools for reduction
• 7 Waste
– Rework
– Excessive Production
– Conveyance
– Excessive Motion
– Waiting
– Inventory in production area (pull system)
– Inappropriate processing
• Reward people for cost saving idea &
action
75. Order Lead Time
• Time from the order placed by your
customers to the time you deliver to
them
Day - O Day - D
Day - O Day - D
e
d Tim
Time
me
r Lea
ad Ti
Lead
Orde
ry Le
ction
rial
e
Produ
Deliv
Mate
76. • Unquestionably, customers prefer short
lead time to long
• What is the element in lead time?
• What is the bottleneck?
• How to shorten it?
Inventory
Lead time
77. • Suppliers
– VMI
– Consignment Inventory
– Equalize MOQ to SPQ
– Order cancellation agreement
– Design-in to exploit opportunities
– Be transparent to the suppliers
• Come to visit my factories
– Go to visit your suppliers
– Exploit new suppliers
78. New Project Evaluation …..
REQUESTED CAPITAL: 1,547,151
REQUESTED EXPENSE: 62,286
Capacity Expansion: 2008 2009 2010
3,930,777 3,930,777 3,930,777
Total Gross Sales
0.0% - - -
Payment Discount
0.0% - - -
Rebate
3,930,777 3,930,777 3,930,777
Total Net Sales
% Tot Cost % Sales
89.0% 2,797,206 2,797,206 2,797,206 71.2%
Direct Materials
1.4% 44,755 44,755 44,755 1.1%
Material Adders
7.1% 224,044 224,044 224,044 5.7%
Labor/Overhead
0.0% - - - 0.0%
Logistics/Whse
2.5% 78,616 78,616 78,616 2.0%
Import Duties
100.0% 80.0%
Total Incremental Cost 3,144,621 3,144,621 3,144,621
MARGIN on Incremental Sales 786,155 786,155 786,155 786,155
MARGIN % Sales 20.0% 20.0% 20.0% 20.0%
Cost Reduction:
Total Cost Reduction - - -
Requested Expense 62,286 62,286 62,286
COMBINED MARGIN 723,869 723,869 723,869
Ul/CSA Expense -
SG&A % Sales N/A N/A N/A
EBITDA 723,869 723,869 723,869
Depreciation: (Enter Depreciable Life) -----> 7 221,088 221,088 221,088
Taxable Income 502,781 502,781 502,781
Tax Rate 0.00% 12.50% 12.50%
Tax Payments 0 62,848 62,848
Working Capital Items:
DSO (Enter DSO) -----> (327,565) (327,565) (327,565)
30
Inv Turns-Normal (Enter Inv Turns) -----> (279,721) (279,721) (279,721)
10
Freight (Enter Days in Transit) -----> (61,145) (61,145) (61,145)
7
AP Days (Enter AP Days) -----> 582,751 582,751 582,751
75
Total Working Capital (85,680.0) (85,680.0) (85,680.0)
EBITDA 723,869.0 723,869.0 723,869.0
Tax Payments 0.0 (62,848.0) (62,848.0)
Working Capital Change (85,680.0) 0.0 0.0
NET CASH FLOW (1,547,151) 638,189 661,021 661,021
CASH FLOW ECONOMICS:
RRR 13%
NPV $ (6,585)
IRR 12.8%
PAYBACK (Years) 2.4
79. • Capacity
– Indirect labor vs. Direct labor
– Salaried labor vs. Direct & Indirect Labor
• What to save?
– Let the employees to tell you
– But don’t forget to motivate them
80. KRI
• Inventory Days
• Obsolete Inventory vs. Inventory
Values
• Inventory with days > target
• Order Lead Time
• …..
81. When to produce for customers?
• Raw Material is converted to Finished
Goods
• Conversion cost is labor plus
production capacity
Buying capacity reserve (预订供应商
的生产能力)
82. Working with Customers
The competition
Better design
Higher quality
Faster to market
Value engineering in the supply chain
• Share the supplier expertise and obtain long-term relationship
88. Weekly Projection
• Cash collection projection
• Cash payment projection
– A/P
• How much to pay and how much be delayed?
• Not a good strategy of always paying your
supplier late
– Expenses
• On time payroll release is a must!!
– Capex
90. Agenda
1. Financial body check-up
2. Re-identification of core competence
3. Risk management: A/R
4. Risk management: Production & Inventory
5. Risk management: Cash
6. Risk management: People
7. In-depth meaning on Risk Management
91. People
• This is you and me that usually expose
the company to risky situation
• Why & How?
• Are you using the following assumption:
– Manager’s job is to protect the company
from the abuses of the workers?!
92. Control
The Self
The
Employee
The
environment
Make your people happy so that they can make your customer happier
93. • Am I the only one that knows the
company and its business?
• Do I welcome opposite comment?
• Do I continuously ask for negative
opinion?
• Do I reward people for preventing me
from doing bad deal which I originally
thought it was good?
• How do I describe “Luck”?
94. • There is no repeated fluke
• Goodness & badness co-exist (yin &
yang)
• The value of devil advocate (loyal
opposition)
• The underlying principles of running
the existing business
• The line between acceptable &
unacceptable behavior
曲突徙薪亡恩澤,
曲突徙薪亡恩澤,燋頭爛額為上客
95. • Belief Systems
– Systems to articulate the values and
direction that senior managers want their
employees to embrace
– Draw employees’ attention to key tenets of
to business:
• how the organization creates value
• The level of performance the organization
strives for
• And how individuals are expected to manage
both internal & external relationships
What is your organization risk appetite?
96. • Boundary Systems
– Management principle: power of negative
thinking, minimum standards
– Tell people what not to do only and let
them figure out what to do
– Of particular value when employees under
pressures to achieve superior results being
collided with stricter codes of behavior
Profit prioritize or Growth prioritize?
97. Who knows your business?
• Yourself
• Your employees
• Your suppliers
• Your customers
• Your bankers
• Your competitors
• But not your investment consultants
上下同欲者勝
98. It is all a matter of TRUST!
Trust
You &
Your Business
Trust
But, why should I believe you?
99. Trust
• Is myself trustworthy?
– To the bank and to the employees?
• Is my business trustworthy?
• Is my business philosophy trustworthy?
• Do I trust my employees?
• Do my employees trust me?
• How do I earn the trust?
• ………….
100. Some sidetrack
Trust:
• I cannot ask for it
• I can accept being trusted or give trust
• When I trust, I expect something
happen
• When I trust, I take the risk
• It liberates and mobilizes human
agency, release creative, uninhibited,
innovative, entrepreneurial activism
toward other people
101. To be trustworthy
• I need to be financially healthy
– proved by the Balance Sheet & PNL
• I need to meet the expectation of the
creditors, suppliers, customers &
employees
• I need to be consistent with what I said
and intended to do
102. Risk vs. Uncertainty
• Risk: I do not know the future
• Do I create uncertainty?
• Why?
104. 5 R – Cost saving strategy
• Remove
– Why does a particular expense need to
incur? Is there a way to totally remove this
expense?
• Replace
– If not possible to remove this expense, can
we replace the function with a cheaper
one?
One to say Yes, Two to say No.
105. • Reduce
– If not possible to remove it, is there a way
to reduce the spending?
– We should think about request for price
reduction from supplier or source
alternative supplier.
There is no repeated fluke!
106. • Redesign
– If not possible to reduce, can we re-design the
process to utilize the scarce resources?
– Kaizen should be a continuous process.
– There should be a regular review of existing
process by freshman.
– The old process creator should only act as a
information provider but not member of new
Kaizen group.
沒有最好 只有更好
107. • Redistribute
– If not possible to redesign the process, can
we have the function to share its value to
different functional area as well as the
cost?
– Maximization subject to constraint is
maxim not only in economics but also in
cost saving perspective.
Great intelligence comes from heart, not mind
108. How to pay your staff
• Buy their time or their talent
• Treat them as staff or “working partner”
• Pay by fixed or portion in variable
YOUR STAFF ARE THE ONES DOING
THE BUSINESS & GENERATING THE
INCOMES
113. Devil Advocate
• Who are they?
• Where are they?
• When do we need them?
• Financial risk management is not the
sole responsibility of Finance
Department, rather, every operation
departments
114. Maxim
• I only earn money by manufacturing
– Better quality
– Lower price
– Higher productivity
– Higher return on lower equity capital
– And nothing more….
115. Do not only use memory
• The financial accounts remind you and
give you an objective view
• Ask your Finance staff to explain
• Demand your Finance team to provide
management accounting information
116. Be focus
• Core competence
• What is your strength?
– You can think more but you can only do
little
• Legal entity concept
117. Avoid Over-Trade
• Wear the right hat
• Continuous checking the size of your
head and the size of your hat
• the measuring tools are
– management accounting reports
– numeric analysis from your finance staff
– Regular meetings with management team
118. • Trust
– Build the atmosphere of entrust
• Transparency
– Everyone knows the norm, the way and its
rationale within the organization explicitly
• Social Capital
– Well-connected within the organization
119. Power
• How to demonstrate power?
• People who have it deny it
• People who want it try not to appear to
be seeking it
• People who are good at getting it are
secretive about how they got it
• People who have it may not know how
they got it, and they do not know when
they will lose it
120. The critical is
• Why don’t you define power explicitly?
– Knowledge and application is power
– Execution is power
– Power ≠ Complacency
– Power ≠ One voice
– Power ≠ Unidirectional communication
– Power ≠ Blind compliance
– Power ≈ Influence
– Power ≈ Humility
– Power ≈ Collaboration
– Power ≈ ……..
121. To be an authentic leader
• Be bold to face our fears
• Ready to challenge our assumptions
• Be able to change our self-perception
• Empowered to get the intelligence of
everybody, not from thyself
Managing others by defining Yourself
122. The intelligence to raise Question
Techniques
• 5-Why
• Not a shame if not knowing the answer,
what critical is no pretense of
knowledge
• Extend the base of knowledge providers
• Empathy
• No rush for perfect answer
Management By Question