Resulting from innumerable diagnoses and audits of companies, a great disaster arises especially at the level of SMEs entities in everything concerning their spending and investment policies. Policies and ways of deciding that lead to very large sums of money destined for products and services that stand out for their lack of priority, necessity and productivity.
Analysis and research based on the behavior of consumers and businessmen lead us to observe significant tendencies to imitate the behavior of those consumers with whom our businessmen who are objects of observation have, in terms of spending.
Wanting to stand out, show sophistication, spend in a manner that is inconsistent with the objectives and missions of the company, is usually something common and leads to disaster for this type of company.
A fundamental point is that the mission of the company is clearly identified, as well as its objectives, in such a way the expenses and investments must be limited to such parameters, considering all expenses or investments unrelated to them as irrelevant and generators of future difficulties, both in terms of profitability and liquidity.
In times of economic growth, spending and investing wisely means accumulating profits for times of liquidity difficulties. Doing the same in times of economic recession means acting with prudence and discipline.
The application of the Expense Analysis System helps both to analyze the expenses incurred in the past to learn from mistakes, and later apply the same analysis to improve when making decisions regarding budgets and execution of expenses. and investments.
For this reason, the Expense Analysis System is an excellent tool when applying kaizen in companies, as it allows us to analyze past behavior, discovering errors and shortcomings, and constantly improve future decisions. The SAG © coordinates perfectly with the Planning-Realization-Evaluation and Action (PREA) process. A continuous process of prevention, implementation, evaluation and continuous adjustments allows all types of companies to improve when making their expenses and investments.
Each expense must be reasoned and analyzed from different points of view and perspectives, thus achieving a comprehensive and holistic evaluation. The expenses and investments are part of a whole and make up the
In the course of the diagnostic work, at the end of the same huge sums of money are wasted without rhyme or reason on products and services that are unnecessary, unproductive and out of any plausible strategy.
What to ask or analyze, and why?
- Are they necessary or not? Are they a strategic expense or cost? Are they fixed, variable, semi-fixed or semi-variable? Do they give rise to a commitment to services or receipt of long, medium or short range products? Extendable or not? Can they be avoided: yes or no? Are they related or not to the running or operation of the company? To which sector or with which area of the company is the expenditure linked? With which processes is it linked? Are they budgeted or not? What is the form of financing this expense? Is it related to future income or not? Of what magnitude and in what period of time? If it is an investment, what is the respective Net Present Value? In the case of an investment, have the various quantitative and qualitative aspects been analyzed? The objective for which they are intended may be covered otherwise more economically.(Try to always avoid having a series of expenses or investments that cover the same objectives - overlapping -). Think about the most effective and efficient way to meet the needs of the company. Think in terms of 80/20 (Pareto). Is spending or investment rational or irrational / emotional? Does it respond to a real fashion or need? Does it contribute to being more competitive, yes or no? Always relate the additional expense with the respective additional income. Based on this: is the increase or realization of the expense or investment justified?Is the expense or investment rational or irrational / emotional? Does it respond to a real fashion or need? Does it contribute to being more competitive, yes or no? Always relate the additional expense with the respective additional income. Based on this: is the increase or realization of the expense or investment justified?Is the expense or investment rational or irrational / emotional? Does it respond to a real fashion or need? Does it contribute to being more competitive, yes or no? Always relate the additional expense with the respective additional income. Based on this: is the increase or realization of the expense or investment justified?
These are some sample questions that are intended to serve the analysis prior to the authorization of the expense, based on the preparation of the budget, and a model for the analysis of the expenses already made.
Expenses cannot and should not be authorized without carefully analyzing the reason and why of them. Furthermore, they should not even be considered without their respective analysis.
All members of the organization must be trained, trained and made aware in order to avoid unnecessary expenses and investments.
Conclusions
If the times are good, there is an excellent opportunity to avoid excessive costs, investments and expenses, which reduce profits and decrease liquidity, helping to build up anti-cyclical reserves.
If times are not good for the economy in general, or for the company or sector, reducing and keeping expenses, costs and investments under total control is key to the continuity of the entity.
In these special times of recession, all these measures take on a very special significance. Not planning expenses, investments and expenses properly is planning for disaster. If the opportunities for effective control are not properly planned, it diminishes, and with it the option of a continuous improvement aimed at the suppression of inefficiencies, waste and unproductiveness.
Whenever a Treasurer or Executive needs resources, they usually find a lot of useless and ineffective expenses and investments made during the fiscal year that they would now urgently need and need to ask a financial institution for. It is in a way like the story of the ants and the cicada. While some work and save for when winter comes the other is dedicated to singing. In the same way, managing the funds or resources of the company wisely in positive moments will allow to avoid difficult moments (which will always be present) with greater presence and capacity.
