MD2

MD2

MACHINE TOOL SPECIALIST

The next MD came from a public sector specialising in machine tools. In his previous organisation he had worked with budgets. He was horrified with our system of working. We never knew that we must have a budget and generally we did not know which product was making a loss or which was making a profit. There was no financial discipline. We never worked keeping budgets in mind. Requests beyond contractual obligations were accepted without additional price. We were not aware how much money we were spending on materials and how much money on labour etc. . The first thing he did was to call for a meeting of all senior officers and explained to them that from now onwards that we will be working for a budget. We prepared all sorts of budgets. For each work order we had budgets for materials, consumables like electrodes, travel, entertainment etc. All these budgets were scrutinised, pruned and finally put up to MD for his approval. He will go through each budget and further prune if necessary and approve. This was our bible and whenever we had to procure materials, consumables etc. the actual was compared with the budget and expenditure will be approved only when the actual was within the budget. If we exceeded the budget we were asked to renegotiate the prices or re workout our figures to bring in within the budget .Initially we were sceptical of the process. But by the end of the year we had made a small profit. From then on we never looked back. Everybody talked of budget and was extended to stationery, transport etc.We looked in to the such seemingly insignificant items as file folders.We discovered that on an average we were buying 10000 file folders per month which means every worker can get on an average of 3 folders per month. Every department used to indent its requirements with inflated figures. We brought in a system whereby the departments have to give a statement how many files they already have and how many thy need for the current month. These figures were consolidated and reordering of 50 per cent of the total was done. Also we made one person responsible for receiving and actually counting the files received. Such small things brought a financial discipline. His greatest achievement was breaking an illegal strike .He left BHPV to join his parent company. He made a great impact on us as to how run a business on sound financial principles.