Operational Failures to Watch Out From

watchoutWhen it comes to running a business, several aspects or facets are to be handled. After all, a company is not made of one but several arms and divisions that make up its whole and one of them is operations. The thing is, many companies fail at this crucial aspect and that spells trouble and a pretty major one too. Mistakes are on from left to right and the occasional slips can make one dive head on first. Yikes! Here’s a list of operational failures to watch out from.

Failure Scenario: The One Man Show

Running a business all on your own is not only silly, it’s also a tried and tested route to failure. Organizations are composed of teams and teams are made up of people who work together towards a common goal. Failure to effectively disseminate tasks and micromanaging are a certified no.

Failure Scenario: One Day Millionaire

Resources have to be spent wisely, efficiently, timely and effectively. It is after all not easy to acquire resources. Cash is easy to spend and hard to earn. This makes it crucial to ensure that budgets are made, controls are set up, spending is managed and unnecessary and/or impulse spending is kept at bay.

Failure Scenario: Product Centered

There is nothing wrong about improving one’s products and services; however, putting products above customers would be an absolute blunder. Why do we sell? We want customers to buy and therefore products must be geared towards them, their needs and wants not the other way around.

Failure Scenario: Inventory Mismatch

Too much inventory can be a pain when it comes to overhead expenses. Too less on the other hand will call for shortages, missed deadlines and stock outs. Moreover, stocking up on unreasonable levels of inventory can create cash flow problems. There has to be a balance with all of these and proper inventory management is needed.

Failure Scenario: Map and Metric Absence

A goal is made up of a series of steps and these steps are a complex set of elements. Moving without a plan or a map will not only be confusing but it can also encourage lost of sight and focus. Also, businesses should audit, examine and measure their performance as they go says AABRS. This will help detect threats and problems faster thereby providing ample time and room for solutions.

Keeping the Business Solvent

business-solvencyApart from profitability and growth, entrepreneurs also strive to keep the business solvent. Failure to do so can after all lead to the company’s demise so it’s only common sense to always keep it in check. The thing is such task isn’t exactly a walk in the park. It’s challenging if not more and will necessitate a lot of work. So how is it done? We’ve asked the experts over at AABRS to share their ideas on the subject.

First things first, what does being solvent mean? In its simplest explanation, it pertains to an entity’s ability to fulfill its obligations as they mature for at least within a twelve month period. It is characterized by a healthy level of cash inflow versus outflow and a ration of more assets over liabilities.

Such status is necessary to keep the business running because insolvency can lead to liquidation or a winding up petition from creditors. As mentioned, it takes work to maintain it and it’s not something that can be done overnight. That said here are some tips on how to keep the business solvent. Read up.

  • Keep records in check. – One way to easily detect a looming solvency problem is by taking a look at one’s financials. Of course, if records and accounting is faulty then it would cease to serve such purpose. This makes it important to ensure that such arm of the organization functions effectively, efficiently and timely.
  • Perform regular audits. – Examination of said records must also be done on a regular basis to be able to see and detect any threats as well as to pinpoint areas for improvement. Also, this should allow for risks to be detected early on so they can be stopped in their tracks.
  • Watch your receivables. – Make sure that cash is not locked up for long in their invoices and that receivables are watched to ensure that they are collectible. This also makes it important for the company to screen out customers before extending credit to them.
  • Manage credit wisely. – To avoid liabilities from growing beyond proportion, proper credit management is required. This entails the screening of all liabilities to be taken, the proper scheduling of payments and all other related tasks. Doing so will help prevent the company from taking on more credit than it is capable of says AABRS and thus in a way help keep solvency.