8 Milli Profit And "Refined" Financial Management

In Yiwu, Zhejiang, there is a straw factory with a profit margin of 8 milli dollars growing rapidly.

More than 90% of the pipette is exported, and the annual output accounts for more than 1/4 of the global straw demand.

According to the manager of this plant, the average selling price is between 8 and 8.5 cents per cent, of which raw material cost is 50%, labor cost is 15 - 20%, equipment depreciation is more than 15%, net profit is about 10%., that is to say, the profit of a straw is between 8 milli - 8.5 cents.

In fact, the profit margins of many small businesses in China are far more than 8 milli dollars. However, because of the poor technical level of financial management, the profit margins of even 8 milli dollars are not guaranteed.

For enterprises, there is too much to learn from the meticulous financial management of this straw factory.

For small and medium-sized enterprises, fine financial management is basically the four basic construction, that is, to ensure smooth operation of capital flow, reduce financing costs, ensure investment efficiency, optimize financial management means, and establish these four infrastructures, it is enough to do a good job in financial management of enterprises.

To put it plainly, we need to budget carefully.

This method makes the output of enterprises increase continuously. However, the problem is coming. The contradiction between output and capital is becoming more and more serious as sales are slow to return.

Most enterprises, due to the scope of the market, often appear in the situation of detained sales and scattered funds.

In order to ensure the return of funds, it is necessary to establish a unified management and centralized management system within the company to use the three level privilege management system, that is, the right to approve the cash expenditures can be highly concentrated in the financial department, the subordinate business departments and the two level financial institutions shall set up two levels of different fund permissions according to the scale of the business, strictly enforce the two line management mode of receipts and payments, and the sales revenue of each unit must be paid in full, and the expenses shall be paid by headquarters audit.

In order to ensure the implementation of the three level authority management system and timely return of funds, in addition to formulating rules and regulations, it also uses headquarters to open accounts, regularly refunds the funds, and makes use of the query system provided by banks to supervise the capital balance of each unit account, and comprehensively and timely grasp the overall financial situation of the company, so as to achieve unified scheduling and greatly reduce the precipitation of funds.

In order to ensure the safety of this part of the sales funds, four management systems are summed up in practice: "agent approval system", "agent file management system", "settlement tracking system" and "accounts receivable account age analysis system".

These systems conduct a comprehensive tracking management of agents before, after and after the event, which effectively reduces the risk of capital and reduces bad debts and bad debts.

Because in the enterprise, the mobile ratio can not be less than 1 is the warning line for enterprises to measure financial risks.

In order to maintain this proportion, and also to ensure the capital turnover needs of the daily production and operation, the company adopted a large amount of cash in the bank account.

In the early years, the interest rate of RMB deposits was relatively high, and the cash in surplus was increased by means of time deposits and 7 day notice deposits.

But in the past two years, the people's Bank of China has continuously lowered the deposit interest rate, and the relative cost of holding cash has gradually increased.

At the same time, the US dollar interest rate in the international financial market climbed all the way up to a record high in 2000. At this time, the company is preparing to introduce two import production lines, which are bank loans, high interest on loans, or the purchase of its own funds to withstand the financial risk of low liquidity ratio.

Is it necessary to maintain interest rates and save interest in order to maintain a normal liquidity ratio?

The company made a serious assessment.

Analyzing the situation of the enterprise itself, on the one hand, good performance and steady accounting policy for many years have made the enterprise establish excellent business reputation and good corporate image.

Not only can we get loans from banks, but also enjoy short-term loans with interest rates, which are fully guaranteed in the supply of liquidity. Therefore, the company has made decisions to purchase production lines with its own capital plus a small amount of bank loans.

This will convert idle cash into fixed assets, which makes the turnover ratio from 1.27 to 0.83. However, from the late stage of operation, this structural change has not caused negative impact on capital turnover. On the contrary, it has also saved financial costs, evaded potential exchange rate risks and brought considerable economic benefits to the company.

This puts forward higher requirements for daily scheduling and control of cash, reducing the cash stock and reducing idle funds, which means reducing loans and increasing profits.

In this regard, the company calculated an account: 2 million yuan less, 1 days interest is 1 workers 1 weeks of wages.

In order to achieve the management objective of reducing the daily cash stock from 500 thousand yuan to 100 thousand yuan, the finance department constantly tap the potential from internal management, and make use of the convenience provided by the company network to speed up the frequency of compiling the cash receipts and expenditure plans. The cash receipts and expenditure plans are shortened from weekly reports to weekly reports, and weekly rolls are compiled, which greatly improves the accuracy and guidance of the capital plan.

In terms of external conditions, short-term loans with preferential interest rates are used, loans are replenishment in time when funds are insufficient, and loans are repaid at any time during idle time, which makes up for the gap between cash income and expenditure, which ensures the daily capital turnover needs and maximizes the interest expense.

Through these two measures, in the first half of 2003, the control target of 2 million yuan in cash was realized, and the interest expense was reduced by more than 20 yuan in only 5 months.

Therefore, the effective ways to reduce costs all come from the detailed analysis results of meticulous financial management.

Timely feedback the relevant data of production and operation to the company's leaders and production and pportation departments, objectively reveals the overall picture of the company's operation, provides the basis for the company's business decisions, and ensures the correct direction of operation.

This model is based on the target profit, and uses the market price as the known variable to plan the total budgetary cost of the company, and then decomposes it into the various departments of the company, and establishes the budgetary cost that constrains the budgetary unit's behavior.

By strictly controlling the implementation process of the budget, examining the results of the budget implementation, correcting the adjustment errors in time, infiltrating the company's business objectives into all aspects of production and operation, effectively promoting the implementation of the "big financial strategy" and enhancing the competitiveness of enterprises.

Cost control requires careful analysis of financial management and improvement one by one.

In the specific practice, the cost, especially the controllable cost, should be refined to the extreme end. Then, on the basis of total control, the cost indicators will be decomposed into layers, and implemented to people or objects.

For example, the telephone fee is refined to every telephone, and the office cost is refined to each employee, and the expenditure limits of departments, offices, expenses and even each worker are worked out.

On the basis of meticulous quantification, combined with the characteristics of various departments, 3 sets of cost assessment schemes have been put forward: the hourly consumption index and the annual production expenditure index in workshop and workshop; rigid restrictions on the expenses of administrative office departments, "limit payment and overspending"; the "cost sharing" method for the market department's expenses, flexible budget management, and the expense amount fluctuating with the sales revenue realized, that is, the control has been implemented, and the production enthusiasm has been protected.

These measures can effectively control material consumption and cost in the production process, and urge departments to establish a cost management system in the whole process of "purchasing, storing, leading and consuming", eliminating human waste and selfish phenomena, and firmly establishing the concept of cost in all staff.

At present, the factory from a pen, a piece of paper, to hundreds of thousands of yuan production projects; from the main production department to logistics management departments, the cost is in effective control.

The first level is the company's "planning finance manual", which should be followed in the company's planning and statistics management, financial system, accounting system, asset management, contract management, cost and expense management, revenue settlement management, accounting work management, financial supervision and accounting personnel management.