On the heels of 12 of the most tumultuous months in recent history, October marks the beginning of a new fiscal year for many businesses. Dust is settling and the markets are leveling off, albeit at lower levels than before. As a slow recovery begins, it’s crucial that young professionals in the material handling industry understand their role in the process. Everyone from managers to salespeople to service techs needs to understand the part they play in their company’s success.
To aid in the effort, MHEDA Edge sat down with a dream team of material handling CFOs to find out exactly what young professionals need to know about managing a dealership in uncertain times. It’s going to be a long journey back to normal, but these CFOs are ready to lead the way.
A CFO’s job combines myriad areas of responsibility, but it all comes down to one basic thing—ensuring the financial stability of your company. The most important way you can help your company achieve this is through accurate forecasting—an increasingly more difficult task.
As a manager during a financial crisis, you have to be flexible and prepared.
Recessions dictate running lean and shrinking your asset base. You will have to work harder to capture a larger piece of a smaller market. When revenue growth returns, you should continue to run lean to make up for lost profits.
Dan Reed, Carolina Handling
I firmly believe that as financial officers, we have a crucial obligation to our dealerships. The integrity and usefulness of information and reports generated by the financial group is critical to our associates. We shouldn’t measure the effectiveness of the financial team by how many reports it produces, but by how the reports are used and relied upon to make decisions within the organization.
If I could impress one thing upon the next generation of young managers, it’s that asset management is key to any successful dealership. You must ensure that the business has the right assets working in the right areas to serve the customer and to generate profits and cash flow. Assets that sit idly can quickly turn into brown lettuce.
If there’s one thing that this recession has taught us, it’s that everything matters. From pricing decisions to adding headcount to purchasing supplies, it all counts. All of our decisions have a consequence and affect not only our individual departments, but the company in general.
The other thing young people should be aware of is the importance of managing from the bottom line. Of course, market share will always be important, but an organization must strive to make gains in productivity and justify all of the costs associated with gaining revenues.
As CFO, one of the most useful things I do is produce detailed financial reports. These reports are critical in regard to helping the company understand and manage the risks that it takes as well as manage and direct its day-to-day operations.
I encourage all Edgers to read these reports. Understanding the numbers from a cause-and-effect basis teaches you how to take actions that provide improved results such as lowering costs and expenses. Historical information is an asset and it needs to be understood to help make informed decisions in the future.
The two most important concepts that must be grasped by anyone who wants to succeed in the material handling industry are the balance sheet and the income statement. It is not possible to teach more complicated financial concepts if a firm grasp on the meaning of these two reports isn’t achieved.
It’s all about cash management. I don’t just mean profit and loss, but how things like accounts receivable, inventory and debt affect cash flow. Everybody’s actions affect the company’s financial results. To that end, everyone needs to understand these basic concepts to maximize their impact on the bottom line.
In times like these, you have to innovate. Attack areas of opportunity by throwing traditional methods and beliefs out the window and starting with a clean sheet of paper. Methods and thought processes that generated historical results may not be relevant or effective today.
Everyone from service techs to CFOs should take this time to make sure they understand their role in driving profit performance. Knowledge of true margins and the true cost per hour of running a service department is a must for anyone looking to make money in this economy. The key is to just keep learning. Improvement is a process that never stops. Keep striving to raise the bar with your performance and you’re going to make it through this thing alright.
Preparing for a recession is incredibly hard work, but it pays off. All of our employees are focused and engaged with what they need to do and because of all of their efforts, we are in a great financial position.
It all comes down to the basics. At the risk of sounding parental, money doesn’t grow on trees. Each employee needs to protect the company’s money like it is their own. In its most rudimentary terms, all business comes down to money. It could be expenses or it could be revenue, it doesn’t matter. Every dollar has to be watched closely.
Hal Latham, Toyota Forklifts of Atlanta
Financials are the highest level performance scorecard. They do not play favorites and they have no bias. The numbers are the results of countless day-to- day actions taken by employees and management. They are the ultimate measurement of the success or failure of any dealership or any employee. Thus, everyone needs to understand basic financials. Learning to speak the language of accounting will help you better understand how your performance affects the financial results of your company. Doing so maximizes your understanding of the business behind your job and increases your value to the company.