​​​Focus on Profit and Loss and Form Cohesion

At the morning meeting of all management cadres on Jan 25, 2023, Mr. Wang elaborated the management idea of focusing on profit and loss and forming cohesion.

Manage the enterprises should grasp the "three flows": financial flow, human flow and logistics. Among these "three flows", the most important is the financial flow. Most enterprises fail because of the outflow of money. In Ouhai, from companies and business units to teams and individuals, the financial department should calculate the corresponding profit and loss, especially the production unit. The heads of all modules, departments and teams should pay attention to the profit and loss, because the profit and loss statement can best reflect whether the organization is profitable. If the enterprise is not profitable, it cannot develop continuously and healthily; If a certain production department cannot make profits, from the economic point of view, there is no need for the department to exist; If a team cannot make profits, then there is no need for the team to exist; If someone cannot create value for the enterprise, then we should carry out "leisure" activities. In short, we should pay attention to profit and loss, and evaluate whether we can make the best use of people and things through profit and loss.

1、 Focus on profit and loss

This week, the company has been emphasizing that the heads of each module and department should pay attention to the profit and loss situation of the day, and reports it in the "daily clearing and completion group". The purpose is to make management cadres pay attention to the value created by each department, that is, whether your department is losing money or creating profits. In traditional Chinese culture, scholar-bureaucrats love to talk about spirit, integrity and feelings. When it comes to money, they feel very vulgar. The ancient social strata were divided into "scholars, farmers, workers and merchants", and "merchants" ranked last. Affected by the traditional "cheap merchant" culture, Chinese people have not formed the habit of reading and calculating accounts. In China's history of thousands of years from slavery to feudal society, there are few records about our ancestors' business and merchant activities. "The Theory of Salt and Iron" is one of the few classic business reviews left by our ancestors. With the transition from the feudal society to the capital society, the Chinese people's idea of "light business" has changed, especially after China's reform and opening up, the Chinese people pay more and more attention to industry and commerce. In Ouhai, before the head of each department takes office, the company will repeatedly emphasize the need to pay attention to the profit and loss of the department under its jurisdiction and not let the company lose money. Learning to calculate accounts and make the department profitable is the most basic requirement of each department head. In order to make the management pay attention to profit and loss, the company has developed many financial statements in the ERP system, such as management profit and loss, net profit profit and loss, etc. Vertically, the ERP system should be able to automatically calculate the annual, monthly, weekly and daily profit and loss of each organization. Horizontally, the ERP system should be able to automatically calculate whether each customer, each order and each frame is profitable. According to the feedback from Zeng Depeng, the manager of Yager Logistics Department, the current ERP system can't do this, or it doesn't have this function, which is also one of the key directions of the future development of the ERP system. At the same time, the company requires the Finance Department to organize training and take examinations on the calculation logic of the profit and loss statement in the ERP system, the correlation between indicators, data sources, cost composition and other financial knowledge. We should let all management cadres at all levels learn to read statements, calculate accounts, control costs and manage their homes diligently and economically, and let "the children of the poor take charge early" in times of economic difficulties.

2、 Associated assessment

The company emphasizes that "everything is for production" and "those who spend money should serve for earning money". The revenue of an enterprise is receiving orders and output. For order-oriented manufacturing enterprises, receiving orders cannot be regarded as output from a certain point of view. Only by converting orders into products, shipping to customers, and realizing cash flow can they be regarded as real income. This situation often occurs in enterprises, because materials cannot be taken back or one or two key positions of the production unit cannot be recruited, which affects the overall output of the production workshop. The wages of the front-line workers need to be guaranteed, while the staff of the surrounding functional departments barely kept their basic income. I remember that when Huang Yong was the chief of the procurement department, I asked him to go around the production workshop every day to see if every workshop had something to do and which workshops had insufficient materials. Let him personally experience what impact it will bring to the production workshop and how much loss it will bring to the enterprise if the materials cannot be taken back, strengthen his sense of urgency, and try to get the matching materials back. Just like parents born in troubled times, when they see their children crying because of hunger, or even dying, as parents, they will not watch their children starve, but should take the initiative to find ways to earn money, borrow if they can't earn it, and ask if they can't borrow it. Although the ancients said that "those who are willing do not eat the food that comes with sorrow", it also depends on the specific conditions and environment. For the material supporting department, no matter how long the order is placed, as long as the workshop has nothing to do, the personnel of the Material Control Department must rush the materials back, because the logistics department is the department that ensures the company's profits and the balance of production capacity of the production unit. For the business department, whether the external environment is good or bad, whether it is the off-season or the peak season, receiving orders is the first priority, and achieving the goal of receiving orders is the responsibility. For the Human Resources Department, it is also their duty to recruit personnel within the specified time. There is no reason to say. Therefore, the assessment content of the surrounding functional departments should be related to "everything for production". Otherwise, "management serves for operation, management serves for distribution and management serves for performance" cannot be achieved.

3. Make the best use of people and things

Business is the leader and finance is the center. Financial work should not stay at the bookkeeping level, but should be managed finance. We should analyze where the money is spent, where there is waste, and where it can be more refined through some financial indicators, such as capital turnover rate, labor cost, cost of main materials and auxiliary materials. By focusing on the inventory turnover rate, machine turnover rate, production line saturation and other indicators to analyze whether we can make the best use of things. If we can't make the best use of things, we need to develop corresponding improvement measures. We should analyze whether the employees are effectively utilized and whether the work tasks of each employee are reasonably allocated by paying attention to the employee's job saturation, the comparison between the task volume and the actual completion volume, and the unit human efficiency. For example, the work assignment of a salesman can evaluate their workload through the level of customers served, the output value of orders received, the number of new product development, and determine how many strategic customers, how many core customers, how many key customers and how many ordinary customers each salesman can serve according to the evaluation results. In terms of work assignment, we should define the workload of each post through scientific indicators, reasonable data statistics and systematic work analysis. Only when these tasks are clearly defined, can we not only meet the service needs of customers, but also make full use of our talents.

Paying attention to profit and loss is the company's most basic requirement for each department head. The company requires the Finance Department to organize training and take examinations on the calculation logic of the profit and loss statement in the ERP system, the correlation between indicators, data sources, cost composition and other financial knowledge. We should let all management cadres at all levels learn to read statements, calculate accounts, control costs and manage their homes diligently and economically, and let "the children of the poor take charge early" in times of economic difficulties. The company emphasizes that "everything is for production" and "those who spend money should serve for earning money". In terms of assessment, the assessment content of peripheral functions should be linked with "everything for production". Otherwise, "management serves for operation, management serves for distribution and management serves for performance" cannot be achieved. In terms of making the best use of people and things, we should analyze whether we can make the best use of things by focusing on inventory turnover rate, machine turnover rate, production line saturation and other indicators. We should analyze whether the employees are effectively utilized and whether the work tasks of each employee are reasonably allocated by paying attention to the employee's job saturation, the comparison between the task volume and the actual completion volume, and the unit human efficiency.