How to Grab the Bull by the Horns
Being part of a rapidly growing company has created some unique challenges for me as a financial professional. I am CFO for Building Materials Wholesale, a Charlotte, N.C.,-based company that specializes in selling interior wall systems (i.e., drywall, metal studs, insulation, joint treatment, etc.) to local drywall and general contractors. In 1998, just two years after our company was founded, we were faced with an interesting problem-we were growing too fast.
While all of us were obviously elated with our early accomplishments, it was very scary at the same time. After all, how were we to know if our growth was going to be sustainable and how aggressive we should be in our expansion plans? How does one manage rapid growth for a company with no real track record? How is inventory managed? As we expanded our operations to multiple locations, the challenges only increased. On the one hand, we didn't want to limit growth by being too conservative but we also didn't want to miss the opportunity by being too aggressive either.
Cautiously optimisticAt that point, the executive team at Building Materials Wholesale decided that we needed to be "cautiously aggressive." By that, I mean that we were going to do everything possible to make the most of this opportunity, without letting the opportunity get the best of us.
The first step towards doing this was to put systems in place to help us manage our business. Right from the start, we knew that we needed an integrated business management software system to manage and make the most out of our resources. We needed a way to manage our inventory intelligently. We needed to get the most out of each dollar we had tied up in stock.
In selecting an integrated system, I really wanted a solution that would help me manage what I still consider to be my four most important job functions:
- Tracking inventory
- Managing inventory and resources
- Managing cash flow
- Overall management of the company
Our choice was Activant Eagle because it is a totally integrated system that doesn't require a lot of technical expertise or maintenance. It was also important that the software solution could keep up with our growth.
So, we began by taking the big step of transitioning away from our old, manual systems and adding our sales data to the new automated system. Thankfully, it was a painless process as Activant's transition team helped us with this move.
Making sure we have what we are supposed to HAVEInventory, as is the case with most companies that have stock, is a big issue for us. We try to control it very carefully and the system's advanced receiving process has really helped us with that. It enables us to tie our inventory counts in with our costs and balance everything each month.
Eagle lets us balance incoming stock against purchase orders. After the stores receive the product, we get the bill at headquarters and work on accurately matching invoices to received purchases. This way, we lessen the chance of errors and loss. Our business management system also ties payables to received purchases so that vendors are paid for only what they deliver. The system creates a temporary voucher that makes it easy to follow the process through to the end.
Making the most out of what we HAVEOnce the stock is in the system, it is very important that it not sit on the shelves for very long. Like most companies, we don't want to have too much capital tied up in inventory. One of the benefits of an integrated system is that all of our stores have access to each other's inventory lists. Multi-store capabilities allow employees to check stock levels at any of the five locations. Each branch orders its own material, prepares purchase orders and receives the material. So, it's really important for the branches to see who has excess inventory before they place an order. We keep inventory at optimal levels when we transfer excess between stores.
We inventory some of our items every month and then do cycle counts on the rest. Eagle automates and expedites this process for us, as well.
Approximately 10 percent of our revenue is generated from special orders and our special order business is growing. We use Eagle's special order module to make sure the right products are delivered to our customers. The module makes it easy: Employees place a special order directly on a sales order or an estimate, without having to create a separate document. They can then view and track order progress as easily as a stocked item.
Making sure we get PAIDMoney is hard to come by for people in the construction trade and it has been especially tight the last few years. With more than 90 percent of our customers on accounts receivable, our company relies on aging reports to identify customers who need attention. We hold weekly credit meetings where we identify these customers and work with our representatives to loosen the purse strings. Everybody is getting squeezed and we're sensitive to that. Having a business management system helps us keep better track on these commitments and collect on accounts before they're past due.
Making good DECISIONSMy favorite Eagle module-and the one that has really helped us manage our business-is "Business Advisor." As CFO, I use this module to keep careful track of our gross profit margins. I check our key indicators twice a day and if they are not where I expect them to be, I make the managers of the stores aware of the issue and we take the appropriate actions.
Before this particular module, most of our decisions were more intuitive and reactive. In the past, we would have to wait for our month-end financial statements to see how we were doing. Now we gather this information from Business Advisor in real time and use it to project where we feel we are going to be at the end of the month. This process allows us to take immediate steps to affect those numbers.
With the help of a solid business management software solution, our business has gone from one store to five stores. I couldn't imagine doing business without a software system because it makes it easy to increase profitability and manage our growing business without adding office staff.
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