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Cost inflation and SMEs – Solutions

Innovative solutions for SMEs, which allow them to overcome the problems caused by cost inflation and gain competitive advantages that reinforce profitability.

In times where cost inflation can exceed price increases, it is necessary to adapt the business model. The latest survey by the SME Observatory shows that many companies see their profitability fall against the growth of their expenses and fear for their sales levels.

How to maintain profitability and solvency in this situation? The most common recipes consist of cutting expenses (without being specific) and sitting at the checkout counter to defend against variations in cash flow. Unfortunately this, done from a purely accounting point of view Kenya Email List, can affect sales and the future of the company. Eliminating costs that make customer satisfaction causes a drop in income that affects solvency. In addition, the lack of investment can cause losses in markets and profitable businesses in the medium term.

Then what do we do? One solution is to implement innovative measures that improve the income / expenses ratio and build solid foundations that sustain continuous growth over time. There are three points to attack: 1) keep customers and increase sales, 2) reduce relative cost, and 3) optimize cash flow. The third point also makes it possible to take care that in the attempt to improve 1 and 2 they do not harm each other.

Innovation in the commercial and business model.

In situations of rising prices and loss of purchasing power, the consumer tends to change their buying habits. Added to this context is local and international uncertainty that Kenya Email List makes buyers more careful when allocating their resources. This happens both in individuals and in companies that purchase inputs.

SMEs are flexible and have good contact with the customer, which allows them to better detect these changes and adapt to them. A good way to take advantage of this situation is to innovate in products and services, as well as in all the processes Kenya Email List that make up the quality perceived by the customer.

Designing a new product or service that revolutionizes the way of satisfying a need, such as the iPad, is a very good alternative. Of course, many SMEs do not have Appel’s development capacity, but within their possibilities and market they can make big differences with small, but successful, changes in their offers.

The innovation of processes related to the client is a good alternative where medium-sized companies can make a big difference. An error in billing, a late delivery or poor customer service can cause considerable losses to the company. In the same way, there are many functions in the daily operation that well defined can improve the consumer’s experience with the product. Customer-focused procedure design can deliver as much value as launching an innovative item or service.

Starting from an analysis of contact points and valuation factors, a pro-market reorganization of the SME can be carried out that enhances the value perceived by the client (read higher price) and also reduces relative costs.

Cost reduction without affecting sales.

Once it is determined how the purchases Kenya Email List are decided, a general study of the company’s costs can be carried out and optimized. In this process, resources are reallocated and unnecessary expenses are eliminated, always considering the return they generate (MD-ABC). It is interesting to see how revealing such an evaluation can be in small and medium-sized companies.

One of the costs that has grown the most in its participation in expenses is salaries (according to Observatorio PyME- July 2010). Therefore, it is important to increase the productivity of this resource. You can start with traditional tools such as time and method studies, but an innovative alternative is to achieve greater commitment Kenya Email List from employees to the task and better focus their energies.

As part of the Pro-Market Reorganization Kenya Email List, and as a derivative of the Commercial Innovation, guidelines can be set and the functions of employees in all sectors can be adjusted. This encourages staff to generate greater value for the consumer.

In a client where we applied this technique, it was amazing to see the change in attitude of the cleaning staff as they understood how their well-done task reduced the contamination of parts and allowed critical equipment to function reliably for many years.

Cash flow optimization

To protect the working capital and the flow of funds, it is essential that studies of expenses and income are carried out over time, considering any variation or lag that may affect the company’s cash flow causing financial problems. A useful tool is to model the financial flow according to ………….

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