How Financial Management Can Transform Operations
- By Piotr Kiszkurno, Chief Financial Officer at Eva-Last
Financial management plays a pivotal role in sustainable business development. Far beyond “mere bean counting” and developing corporate consciousness, sound financial management can transform operations to realise strategic objectives and secure sustainability.
With rising interest rates and recession dominating news headlines, growth or expansion strategies during cycles of economic contraction are often viewed as overly optimistic, if not downright impossible. And while it may be tempting to “button down the hatches” as the US Federal Reserve tightens fiscal policy, energy prices escalate and companies lay off staff – threatening our very survival – tough economic conditions present unique opportunities to streamline resources and operations to improve efficiencies.
In addition to balancing the income and expenditure of a company to enhance profit margins, finance must integrate systems that enable expansion and growth.
First and foremost, business finance should direct operations to optimise capacity whilst mitigating risks. Prudent financial management aligns the company’s resources and operations in a pro-active manner to ensure the business evolves.
Eva-Last’s international operations are geared to ensure maximum capacity utilisation and capital allocation. Our vertically integrated business model offers seven eco-friendly product categories in various brands that are further customised by colours to suit different territories. The business strives to continuously adapt and evolve production lines and product portfolios in line with regional demand and trends.
A sophisticated sales forecasting and production planning programme combines early-buy incentives, rebates and attractive volume discounts with seasonal production schedules, stockholding and warehousing.
By offering competitive margins and attractive payment terms to stimulate demand for distributors’ pre-orders, our financial model generates cash-flow and liquidity whilst establishing the necessary operational capacity. Our world-class plant and equipment ensures uniformity and continuity for uninterrupted production, with interchangeable parts in the unlikely event of a breakdown.
Allocating working capital to particular production lines with pre-determined profitability, Eva-Last’s financial management team direct operations and logistics to increase or decrease capacity according to demand, minimising downtime and increasing stockholding at localised distributors.
By “on-shoring” our distribution model through regional distributors, Eva-Last is able to ensure product availability and increase market penetration, particularly during peak demand periods, establishing a competitive advantage and further bolstering growth aspirations.
This model has also proven to be an effective cost-containment exercise. By anticipating demand and pre-ordering inputs on economies of scale, Eva-Last minimises unexpected raw material price increases and secures profit margins, preventing production delays and out-of-stock losses. Furthermore, Eva-Last plans product obsolescence, through product range management to ensure there is no excess stockholding on ranges to be discontinued. By discontinuing the less profitable lines or updating colours on trend or when necessary, we are able to develop or adapt new product offerings timeously to ensure compliance as technology, regulations or trends change.
Finally, our astute financial management has enabled Eva-Last to navigate through supply-chain disruptions caused by uncontrollable macro-economic factors such as stoppages during the Covid-19 pandemic, soaring container costs, and the “Trump Tariffs” on imports due to strained US-China relations.
As our evidence shows, the influence – and importance – of financial management on operations cannot be understated. Financial management can truly transform operations.
“Fools rush in where angels fear to tread.”
Resources: https://papers.ssrn.com/
