Financial Restructuring Of A High Growth Enterprise

In this year's report, Yantai Wanhua polyurethane Limited by Share Ltd has become one of the few bright spots of listed companies. The main business revenue of the company is 1 billion 619 million yuan, an increase of 53.64% over the same period in 2004, with a net profit of 328 million yuan, an increase of 52.5% over the same period in 2004.

Following the BASF, Bayer, Huntsman, pottery chemistry and Mitsui chemistry, the company has sixth independent intellectual property companies with MDI (two phenyl methane diisocyanate) production process, and Yantai wanwanji ranked 2002 in Shanghai and Shenzhen listed companies in 2002 and 2003 in the comprehensive strength ranking of listed companies. In 2004, the company was selected as the "China Version 50 50 - the most widely growing blue chip A share listed company in the next ten years".

In this beautiful pcript, Yantai Wanhua's sales revenue rose from 210 million yuan in 1999 to 2 billion 100 million yuan in 2004.

The continuous high speed growth has tested the management control system of Yantai Wanhua.

Since 2000, Yantai Wanhua's main business revenue has increased by more than 50% over the past four years, and its net profit has increased by more than 60% annually.

Behind the rapid growth, what kind of financial system provides the company with an endless power engine?

Warren Buffett said, "I never invest in companies that I don't understand."

More rational analysts, investors, scholars and business managers glared at the source of Yantai Wanhua.

After seeing and looking, it seems that we understand the oligopoly and the increasing demand.

But in fact, "source" is far more than that.

In the name of external force, it is hard for the outsiders to imagine that in, when the company was just founded, the financial department of the core of the management and control system has only five employees, and the tools used are also backward financial software.

With the increasingly clear vision of Yantai Wanhua development, general manager Ding Jiansheng and chief financial officer Kou Guang Wu clearly realized that the financial system and management system at the beginning of the company were difficult to support the rapid growth of business, and change was the only option.

However, change and resistance have always been twin brothers. It has become a difficult choice to use internal force to pass customs or to brainwash outside forces.

1999 at the end of summer and autumn, when the last hot summer is still struggling with the coolness of early autumn, Ding Jiansheng has long known it. Kou Guang Wu also understands it.

A year later, under the promotion of general manager Ding Jiansheng and chief financial officer Kou Guangwu, Yantai Wanhua introduced DDT international group financial management consulting company, and conducted a comprehensive consultation survey on the company's financial management system.

"The growth of company performance and scale must be based on an advanced management system.

If the scale is bigger and the management system can not be consolidated, the company will probably become a castle in the air. It looks good on the surface, but it can not bear the wind and rain.

The introduction of advanced international consulting companies is the best choice.

Kou Guangwu, chief financial officer, said.

Yantai Wanhua was founded in December 20, 1998. The main sponsor is Yantai Wanhua synthetic leather Group Co., Ltd. its staff mainly come from Wanhua synthetic leather group.

Like many other state-owned enterprises, Yantai Wanhua has many inherent disadvantages of state-owned enterprises at the beginning of its establishment. The overall quality of personnel is not high, the concept is backward, and it is not easy to accept change.

Therefore, the introduction of DDT international has much meaning.

"With the help of external brain, we can not only bring advanced ideas and methods, but also more convincing.

As a state-owned enterprise, if the internal force alone is to enhance the management level, the effect will often be poor.

Kou Guangwu said.

Just after the autumn of 2000, DDT International's project team quietly entered Yantai Wanhua.

The arrival of DDT international project team has caused a lot of vibration in Wanhua employees.

Curious, fresh, doubtful, puzzled, hesitant and uneasy.

The predecessor of Yantai Wanhua, MDI branch of Yantai synthetic leather factory, introduced a set of MDI production facilities with a design capacity of 10 thousand tons from the Japanese polyurethane company in the early 80s of last century.

Due to the complexity of MDI manufacturing technology and the design of the device, the operating rate of the device is only 60% to 70%.

Until 1996, under the guidance of Ding Jiansheng's strategy of "walking on two legs", after self research and development, the capacity of the reconstructed plant finally reached 12 thousand tons.

However, according to the universal standards of the world, only 40 thousand tons of production scale can enable enterprises to survive.

Until 2001, Yantai Wanhua's capacity reached 40 thousand tons.

For such a survival enterprise, the introduction of expensive international consulting firms to provide some invisible and intangible consulting services seems too extravagant.

"At that time, many people did not understand the introduction of DDT international, and felt that buying such services at that time was" wasteful ".

But Ding Zong is very supportive of this. Managers need to take precautions. If we wait until the scale of the company is expanded, we will consolidate the management system. It is like a hundred meter athlete wearing leather shoes after speeding up to think about changing the running shoes. The effect can be imagined.

Kou Guangwu said.

Since the second half of 2000, DDT international has conducted a comprehensive review of the budget management of Wanhua in Yantai in a year's time according to international standards.

From 1920s to 1920s, the United States general electric appliance, General Electric Company and General Motors took the lead in adopting this method and achieved amazing performance.

This method becomes the standard operation procedure of large industrial and commercial enterprises.

So far, the world's top 400 enterprises have introduced budget management, which has become an international business management method.

Before accepting DDT international consultation, Yantai Wanhua also carried out regular budget management, but its budget preparation was not precise enough, and the budgets of all departments were not coordinated, so it was very difficult to play a controlling role.

The DDT international project team first combed and optimized the internal control system, accounting system and post process of the finance department.

Then, from the perspective of financial management, the whole company's procurement management, production management and marketing management were comprehensively consulted and standardized.

"During the year of accepting DDT international consultation, it was very hard work," said Gao Ying Di, chief accountant of Yantai Wanhua finance department. "Everyone has to complete the daily work in addition to completing the daily work, and also has to fill out various forms with the project team. The projects in these tables are very comprehensive and meticulous, which is a great shock to the employees who are accustomed to rough budgeting at that time."

After a year's efforts, DDT international has reorganized and optimized the business process of Yantai Wanhua, and initially established a comprehensive budget management system.

As the main tool of management control, the key to comprehensive budget management lies in two words "comprehensive".

Comprehensive budget management requires not only full staff participation but also whole process control, including not only financial budgets, but also business budgets and capital budgets.

"People are the core factor. It is very important to have full participation in a comprehensive budget," said Gao Ying. "DDT international has provided a lot of training for Wanhua employees while assisting Wanhua to establish a comprehensive budget system, and the idea of full participation and responsibility is gradually accepted by millions of Chinese people."

"DDT international has brought the most advanced ideas and methods to Yantai Wanhua, which is our greatest achievement," Kou Guangwu said.

However, there is a long way to go from sowing to rooting, and from the initial establishment of the comprehensive budget management system to effective implementation, it is impossible to achieve overnight.

Nitin Noria, a professor of business administration at Harvard Business School and William Joyce, Professor of strategy and organizational behavior at Dartmouth College's Tucker School of business, conducted a 10 year follow-up study of 160 enterprises. It has been found that 200 management methods have been used in enterprises in the past 10 years, but none of these methods can ensure the success of business operations. The magic weapon for success lies in four main practices: excellence in strategy, implementation, culture, organizational structure, and four secondary practices -- the combination of two talents in talents, innovation, leadership and merger, forming an inseparable management system.

The comprehensive budget management system is no exception. The idea and method can not guarantee the success of the enterprise.

In the two years after the establishment of the comprehensive budget management system, Yantai Wanhua made a budget according to the DDT international design system, but the effect was not satisfactory.

At that time, many employees still had many misconceptions about the comprehensive budget. Some people thought that the comprehensive budget was bound by themselves, so they did not fully cooperate in budgeting, and often exaggerated the figures.

The number is exaggerated, and performance appraisal is difficult to carry out according to budget figures.

When the actual performance and budget figures differ too much, the examination and control will be meaningless.

"Although employees have gained advanced ideas, there are problems in their implementation, and it takes a process from acquiring ideas to implementing them effectively," Kou Guangwu said. "In 2001 and 2002, the budget of Yantai Wanhua made full participation and comprehensive budgets, but failed to achieve full control. This is the crux of the problem."

In 2003, under the promotion of general manager Ding Jiansheng and chief financial officer Kou Guangwu, Yantai Wanhua strengthened the overall budget management process control and performance appraisal.

"In 2003, under the promotion of management, employees began to take seriously the budgeting. As management requires strict performance in accordance with budgetary data, staff will naturally try to be accurate when preparing budgets," said Gao Ying Di, the head of accounting.

In 2004, the effect of comprehensive budget management was obvious, and the cost of various departments of the company decreased to varying degrees.

"Through strict implementation of comprehensive budget management, only 20 million 700 thousand yuan will be saved in 2004 to save energy and reduce consumption," he said.

Kou Guangwu said.

After the breakthrough of the tool bottleneck and the survival limit of 40 thousand tons of capacity in 2001, Yantai Wanhua independent pformation and research and development equipment capabilities continued to improve.

In 2002, Yantai Wanhua's production capacity expanded to 80 thousand tons, and this figure continued to rise to 110 thousand tons in 2004.

With the expansion of production capacity, Yantai Wanhua's sales revenue and net profit also increased at an annual rate of over 50%. The competitiveness and industry status of the company increased continuously, and gradually changed from the "follower" to "the leader". Its share in the Chinese market exceeded that of the multinational companies and became the undisputed overlord in the field of MDI in China.

At this time, Yantai Wanhua management did not relax the finer management of the company because of the "heavy financial burden".

With the rapid expansion of the company's scale, Kou Guang Wu clearly realized the importance of the management and control system to support the rapid growth of the company's performance.

It is the best choice to make a comprehensive budget management.

"No matter how profitable the company is, we must have a clear rule that the resources of the company are limited, and the demand for resources is unlimited. How to maximize the value of the limited resources and make good use of steel is a problem that managers must solve."

Kou Guangwu said, "there is no doubt that comprehensive budget management is the most effective means of resource allocation for enterprises."

After several years of comprehensive budget management practice, the concept of full participation, omnibearing budgeting and whole process control has taken root in Wanhua, Yantai.

However, with the rapid growth of business performance, new problems have emerged.

"In 2004, the company's budget management system has been relatively sound, but due to the constraints of budgetary management tools, the company's budget management is still difficult to meet the needs of rapid development of the company."

Kou Guangwu said.

DDT international group financial management consulting company has brought advanced ideas to Yantai Wanhua, and has established a sound comprehensive budget management system in accordance with international standards.

However, in several years of comprehensive budget work, Yantai Wanhua has been using EXCEL to compile and manage budgets.

"Budget analysis under manual budget is very inefficient. It usually takes two weeks to make a simple budget analysis, and the accuracy of budget data is difficult to guarantee. Budgetary analysis is too extensive to meet the needs of company management for budget information."

Accounting Director Gao Ying Di said.

In 2004, Kou Guang Wu, chief financial officer, realized that new tools must be introduced if he wanted to do deep and comprehensive budget management.

"Choosing tools is a real problem," Kou Guangwu said. "Choosing software is like buying a house, not only to meet current needs, but also to consider future needs; not only to run stably and easily, but also to have flexibility and intelligence."

In the autumn of 2004, the selection became the most talked about topic in Yantai Wanhua finance department.

The company inspects the main software at home and abroad, especially the flexibility, intelligence and stability of the software, and finally selects Hyperion Solutions Corp's Hyperion Pillar software.

It took only three weeks from the initial contact to the final signature, "Kou Guangwu did not cover up to Hyper.