It’s not a step but entire process

Last 50 decades saw the shift from the practice of a person being jack of all trades making way for specialists. Specialists brought in focus on the skills, accountability and final goods or service delivery. So a banker traditionally used to handled entire customer experience from first visit to disbursement to final repayment. Now, from cold calling to document collection to credit evaluation, documentation, disbursement, servicing and collection is being handled by different specialists ( One point contact of Relationship Managers may/may not be available).

Entire process has now been divided into activities or roles each catering to one step of the entire chain. Each step or combination of multi steps is to be completed by the team assigned to handle it and then it’s others responsibility.

This is a good practice till the time every step is efficiently completed and is aligned to the end objective. The problem starts when inefficiency starts coming up in the various steps by focus only on completion of one’s respective role or step assigned. Reason probably could be to complete the step quickly in the fast paced demanding world where churning the maximum numbers has become the norm.

So does it help . May be in short term. But ultimately this will lead to the process not being completed or take longer to complete or quality suffers.

Let’s take an example of a process we all can relate to . Preparation of a meal which requires ordering the supplies , initial preparation eg cutting of vegetables , final cooking & serving .

No matter who is making the meal if the supplies are not of required quality or timely , if the vegetables are cut but are not of uniform size , the meal will not meet the time & quality standards & ultimately the efforts of everyone doesn’t yield the desired result . If person cutting the vegetable may in order to finish up the step doesn’t cut in the portion size required ( there may/may not be some quality benchmarks or service level agreements to be met) & instead cuts bigger just to finish , it will take longer to cook and the person doing the cooking will have to stretch beyond to get it done. If not then customer delivery will suffer.

But if everyone whether in cooking or banking or any other process starts looking at it from the end result perspective; the results and delivery would be different.


CREDIT SERIES-6- MIS-match in numbers

Numbers if don’t match there is a story to be uncovered.

Other key number to look at other than financials is the regular MIS in form of stock, book debt statement and creditors statement.

Listing some common practises which helped understand the business better and identify signs which helped decision-

  • Compare the difference between the year-end inventory levels as per stock statement and balance sheet & understand the reason for major variance therein. Normally for the year end month ie March the statement submitted is not of Mar31 but Mar 28 or 30.
  • Ageing of the components (stock, debtors, creditors) is not seen in majority of statements but if there is a spike or levels which as per industry/ business type appears higher understand why ?
  • There was an instance when on comparison of receivables over 6 month period revealed that similar amount was appearing over the period and bucketing was shifting back and forth. On further discussion it was found that there were serious receivable issues being faced by the company.
  • Look for related party names in receivables & creditors list. Creditors list is not regularly shared but if levels are sizeable insist and see how it is spread out.
  • Businesses where inventory is the key component look at the quantitative numbers, ageing and composition.
    • Quantitative nos will help you arrive at the average cost per unit which for a commonly available item can be compared with market price. A customer was showing his closing at quite a higher amount as compared to avg price. On further enquiry it was found that the customer was also making two different stock statements- one for bank and other which was actual.
    • Ageing of inventory is normally not given but esp for businesses risking old inventory like automobiles check the ageing from invoice. There was once can interesting instance of same invoice number appearing for two different dates. See the quantum of such instances and understand the reason for same. Subsequently it was found that the client was facing serious challenges on old inventory and was trying to sell his dealership and assets to tide the situation.
    • Look at what exactly are they carrying in inventory. There was this other instance that the entity was showing jewellery and land bank in inventory while the core business inventory was not substantial. So overall inventory number was looking fine but the composition of it was not what the business was into. Later the business was found to have diverted funds and filed for debt restructuring.

Note: These are personal views and in no way represent the organization(s) I am (was) part of.