Improving Performance of SME Unit
Summary: For any small manufacturing unit, the following are required to be done on regular basis to keep the momentum year on year basis.
When you apply for bank loan, bank ask certain data which is known as CMA data analysis. We insist that this data must be prepared by entrepreneur him self and to put the same in the language which bank understand can be done by chartered accountant/external consultant.
Why this to be done by entrepreneur: as entrepreneur after lot gut feeling and passion, has narrowed down on particular product for his enterprise so he knows all difficulty about the project which he can put to understand in financial figure weather this project will be generating enough profit year after year till he repays his term loan.
Weather financial ratios like EBIDA is good and he is able to service his debt and shall generate to support additional working capital for next five to seven years. Once he does this himself, he can fine-tune his own thinking and verify his assumptions and then put in the format as required by bank. Once loan is sanctioned, he will have to evaluate his own performance on monthly basis in which he has to analyse the variation and take corrective actions required.
Many times assumption made both verbal and written changes so this will change the performance. This will make the entrepreneur to identify areas where correction is required and timely action taken will improve performance greatly.
Many times ,external consultant or mentor will give critical input and or early signals of weakness developing in the system, can be analysed in the detailed and learned line of action can be taken.
CMA data is like thermometer, which gives a reference like in the human body normal temperature should be 98.4 °F but if it is higher or lower gives indication, that something is not right. Many times we may have to consult doctor and suitable treatment.
CMA delta is financial thermometer for the unit.
Productivity Improvement: Observation of particular process and doing time study will give lot of ideas to improve productivity. But irrespective of anything, 5 ‘s’ has to be followed mechanically in the unit, How small or big it may be.This culture itself for new unit is easy but for the old unit, This requires entrepreneurs commitment to change the attitude of his own team and it has to be monitored.
Conclusion: Prepare CMA data yourself, monitor your performance on monthly basis,take corrective steps benefiting your performance.
When start new unit follow 5 ‘s’ from day one and for older team commit yourself.