death of the average - why your company must proactively look inwards to sustain itself

Consulting and Advisory Death of the Average: Why Your Company Must Proactively Look Inwards To Sustain Itself. It must also be said that the profitability (ROI) and productivity index of an average staff (per head) in a few random sampled “Grade B” organizations in Lagos, Nigeria has in so many years dropped so badly (back-to-back) that it is looking much like a broken record “year-in, year-out”. This brings to bear that an Organization (big or small, corporate or well-organised private sector -SMEs) is only as good as those behind its’ vision and mission and general operation, be it at the frontline, back office, or at the management strata.

Augustus Hall Limited (RC. 912580) www.augustushall.com

http://www.augustushall.com/

Consulting and Advisory

www.augustushall.com

www.augustushall.com | Augustus Hall Limited (RC. 912580) 2

Augustus Hall Limited (RC. 912580) is a privately owned Credit Control Consultancy Firm based in Victoria Island, Lagos, Nigeria.

We remain focused on applying our in-depth experience and up-to-date knowledge to helping our clients towards an even brighter

business future. We specialise in offering: Credit Industry Training | Commercial Debt Collections | Consumer Debt Collections |

Credit Control Consultancy | Credit Risk Identification and Mitigation | Debt Mediation | Commercial Mediation and Negotiation |

Contract & Commercial Management | Research | Trades and Business Development | Debt Restructuring, Workouts and Collections

| Terms of Trade Documentation | Business Rescue and Support | Debt Purchase and Sale Brokerage | Creditor Meetings Service |

Factoring & Invoice Discounting | Refinancing & Asset Finance | Trade Finance | Credit Insurance | Accounts Payable Management

Solutions | Accounts Receivables Management Solution | Outsourcing | Document Management Solution | Invoicing and Billing |

Consulting and Advisory | Audits and Performance Evaluations | Software.

www.augustushall.com | [email protected] | Tel: +234 (0)1-217-0730, +234 (0)802-977-

2849, +234 (0)702-534-7079, +44 (203)-5140-885 | Fax: +44 (203)-5140-872 | P.O. Box 4528

Surulere, Lagos State, Nigeria.





Death of the Average: Why Your Company Must Proactively Look Inwards To Sustain Itself.

Introduction

The New Economy here in Nigeria is harsh, with lots of uncertainties. For most corporates sourcing businesses (or repeat business) are scares and even if available the “order- to- cash” cycle takes so long. Coupled with high cost of running business in Nigeria which is ranked among the first 7 Countries in Africa, characterised with poor electricity supply, bureaucratic (rigid) land use policies, lack of basic infrastructures, poor and mostly un-administered Government policies, poor access to banking facilities and services (hence, poor access to free “international” trade and exchanges), revised (constantly somersaulting) Domiciliary Account Holding policies, tight control of Foreign Exchange management in “sixes and sevens”, bureaucratic bottle-necks, lengthy protocols in business registration, currently increased electricity tariffs, removal of subsidies on petroleum (even though its’ prior existence was never felt, benefitted from or noticed), and all other scarce means or resources to essential business promotion, welfare and growth; while some has resorted to downsizing which has now been seen as an annual culture and still looks to be un-ending (due to huge staff strength and high operational over-heads) while for most SMEs it’s a question of survival of the fittest.

If I May Ask, How Do You Do?

Whether you may “be fine” or “not fine”, we must always note that the first Law of Nature is Self Preservation. As a corporate or business entity, now where do you stand in all of these episodes?

If you ask me, the New Economy has birth the death of the AVERAGE. This simply means that for you to survive and be relevant in the new dispensation (whether as an individual since this would also create intense job delivery competition within co-workers and exacerbate work place power tussles, job position lay-offs down the hierarchy of which only those personnel lagging behind in performance will fall victim) you must be BEST at what you do, and more so you must be exceptionally innovative, result oriented, value driven, and creative, ability to multi-task and be inward looking so as to re-create value and hence sustain profitability in all spheres.

Your service delivery, existing systems and all deliverables within the value chain must be well perfected and orchestrated. As for the AVERAGE corporates, or companies or any other entity within the real sector, the age or the era of the “AVERAGE” is gone.




It must also be said that the profitability (ROI) and productivity index of an average staff (per head) in a few random sampled “Grade B” organizations in Lagos, Nigeria has in so many years dropped so badly (back-to-back) that it is looking much like a broken record “year-in, year-out”. This brings to bear that an Organization (big or small, corporate or well-organised private sector -SMEs) is only as good as those behind its’ vision and mission and general operation, be it at the frontline, back office, or at the management strata.

This takes me be back to the subject matter of this article once more, as you can’t dress-up an old woman (an operationally lagging firm) to go to war, irrespective of the military kits, apparatus, apparels, resources and arsenals at her disposal; hence this simply means that you must:

1. Re-View (Inwardly), 2. Re-Haul (Re-Peal), 3. Re-SWOT (Re-Strategize), 4. Re-Fix (Re-Vamp), 5. Re-Align (Re-Position), 6. Re-Orientate (Re-Learn Objectives), 7. Re-Select (Re-Team), 8. Re-Develop (Re-Innovate e.g. Departmental Vision and Mission) 9. Re-Prioritize (Re-Manage by Objectives), 10. Re-Start (Re-Serve).

As it is most companies would need to be very strategic and proactive in the new business environment, and as a result of this it would drastically call for strict attention on these 3 Cardinal points listed below:

1. Strategic Human Resources Selection and Management a. Flexible/Multi-skilled b. Critical Talent c. Gaps Analysis d. Mindset Paradigm (as mindset of staffs 5years ago may have weaned or simply may

not be the same needed to do today’s task which makes up a “critical mass”; hence a new paradigm is needed)

2. Strategic Cash Flow and Financial Management




3. Strategic Business Development (Re-Modelling) and Operational (Turnaround) Management

“Who Moved My Cookies”

In line with the aforesaid, I would choose to only analyse and emphasize more on the second cardinal point above as it relates to Strategic Cash Flow and Financial Management. I strongly advice that Companies must tackle bad debt (or to further say; performance risk, default risk, payment risk, and any other nature of credit risk) or risk becoming another failed company statistic.

It must be well spelt out that most “outwardly-looking-good” companies and their suppliers are facing massive financial pressure due to the current economic climate.

According to a Survey in Nigeria, most sectors such as the Construction, Manufacturing, and other Service oriented firms and without leaving the SMEs have fallen at the fastest pace for two and a half years in the last month. Indeed problems in the construction and manufacturing sectors (to mention just a

few) are being cited as some of the key reasons why the unemployment rate in Nigeria was seen to have sky rocketed; hence the Economy fell back into recession at the start of 2012 and till date these mentioned sectors begging for bailouts.




To make matters worse businesses in the construction, manufacturing, and other service oriented firms in the various sectors are waiting longer than any other sector to get paid by customers, waiting on average 72.2 days to be paid. With more and more construction, manufacturing, and other service oriented firms’ projects being shelved or “mothballed” due to current financial insecurity, and tight cashflow, only the fittest will survive and remain profitable; hence, we are urging businesses in the construction, manufacturing, and other service oriented industry everywhere to undertake a full credit review and overhaul of internal credit processes to ensure a successful future and avoid becoming one of the above statistics.

“We have seen a massive 55% increase in enquiries from businesses in the construction, manufacturing, and other service oriented industry and from “selected few” associated trades such as support service businesses seeking to recover unpaid

debts and overdue accounts. Many problems could have been averted by companies reviewing and overhauling their internal credit control procedures. By making simple- changes such as how and when they grant credit and reviewing how they chase unpaid invoices, a company can boost cash-flow and drastically reduce it’s bad debt provision.

Most importantly having a specialist knowledge of how the construction, manufacturing, and other service oriented industry works including the collection of authorised extras overspends and unpaid retentions is essential to get the cash flowing back into your business”

Key Areas to Review Are:-

How credit limits are set and monitored

Internal dunning cycles and collection strategies

Terms and conditions of trading

The early use of third party debt collection agencies to resolve problem accounts

Choosing a collection agency experienced in dealing with construction, manufacturing, and other service oriented firms’ disputes and the ability to negotiate, and mediate.

Liaising with financial organisations




Processing payments and allocations

Reconciliation of accounts and accounts analysis

Developing strong relationships with customers

Timely collection of outstanding debts in a high volume environment

Dealing with debtors, securing payment plans, finalising matters and accounting to clients

Outstanding invoices for goods and services supplied by wholesalers to the retail industry

The recovery of unpaid hire invoices in the plant hire / construction industry.

Dealing with debtors, securing payment plans, finalising matters and accounting to clients.

Last in all of these, is having a STRATEGIC REVIEW of your current CREDIT POLICY to sync-

in (synchronize) with the new business environment.

At this juncture, we should also have it at the back of our mind that all hope is not lost, as the new business environment would simply usher in a much stronger and vibrant real sector driven economy, with a well diversified “non-oil reliance” Economy. This will bring with it the New

Enterprise, value driven establishments and with standards raised above the bar (status-quo).

Lastly, The Nigerian Government’s current attempts to help develop the Nigerian Economy towards been more of EXPORT (Value) ORIENTED than the current IMPORT (deficit) ORIENTED which seems to be the norm for decades. More so, this EXPORT (Value) ORIENTED thinking would directly enhance a well diversified and real sector driven business environment; hence, boosting productivity, trading and profitability do not go far enough and

business owners need to ensure they do everything they can to help themselves.

Roughly on an average now (as at the time this article was written – Jan. 2016), the Naira exchanges at a N285 to $1 US Dollar, although it may be debatable in some quarters that this may not represent true international value of the Naira, but it is very important at this new era of our economy to allow the Exchange rates to be flexible (i.e. to be driven by the forces of demand and supply) rather than the Government always trying to manage it.




This could also be achieved by having proper management of Nigeria’s resources and expanding productive base.

To make it worse the Central Bank has also revised their Bureau De Change – BDC policy, which now states that the Central Bank will no more source FOREX for the BDCs anymore, so the BDCs are left on their own to now source (do the home run) for their stock in trade.

Lastly, we need purposeful Leadership in all spheres to drive home the real objectives our existence be it in Government, or in the organised private sector. Looking inward to survive will yield numerous returns (positive returns) and further boost GDP. But to avoid asking the question – “Who moved my Cookies” - yet again after the whole dust must have settled; we must be courteous and Re-Strategize and be Re-Sourceful.

death of the average - why your company must proactively look inwards to sustain itself

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