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You Don't Mess With the FinMan (Part Two)

[Continued from Part One (Click Here for Part One) Recommended: Read Part One before You Read Part Two]

Part Two - The Accountant
"Its my turn!" He asserted once again, and started his dissection.

Round Seven : First Wicket (The Production Head)
"I am starting with the Production Department.
"What has been said, need not be repeated. What is unsaid, has to be said. The production capacity is presently stretched. The machineries will not be in a position to withstand such utilisation level. I am pretty sure, our Chairman will recollect the Machine Manufacturer's presentation couple of years back. They were very clear on one thing - The machine's capacity has been given as almost 20 tonnes on the assumption of utilisation throughout the year. But, any usage beyond 18.75 tonnes is not recommended. In fact, it is prohibited. If it is done so, a monthly maintenance should be done by engaging their services. I am afraid, our production manager is not aware of that.

"It is pretty much available in the terms of warranty, the copy of which is available on our ERP accessible to each and every one of us. If only you have read that.

"And that's not the end of it. His obsession with high production, and the single minded pursuit of impressing you, has not impressed the Electricity Department one bit. There have been seven outages over, resulting in penalty of Rs.27 Lakhs. And this is only for the past one month. This has been happening over the past three months now.

"And the 'alternative energy management' which our Production Head was referring to is nothing but using Generator whenever the Electricity Department had unplugged our power source, which was for 22 days in the past three months. And seven generators have been hired from outside, which four would have been adequate."

"Do you know the Power Requirements? You have any idea about the production process? You should be aware of them before commenting that there has been over hiring of generators. As our Sales Head highlighted, Accountants know nothing about Engineering." The Production Head was literally boiling.

The Accountant did not react. There was not a sweat. He was cold, and asked the Production Head, "As I said earlier, it is my turn now. If you are done, I would like to continue. Lets assume that I know nothing about engineering. Some people would also like to venture out and state that I know nothing about Accounting either. Fair enough. What I know as a simple truth is the fact that three of our generators of the same capacity, our own generators, were lying in Unit No.2 without one second of usage over those 22 days. A productive asset, not used at all! By the Production Manager. And I don't think that you need to know Engineering to compute seven minus four is three. All you need is common sense, and I believe we are endowed with it.

"And before, the Production Head states that incremental output, and its resultant profit would result in compensating this, I would like to state that, it is impossible as demonstrated by the workings, I have already shared with you all people. Again, if only you have read that you will appreciate it. To summarize, the incremental benefit needs to be sustained for over 127 Years before recovering incremental cost and machinery replaced."


Dishkoooom..... The production manager was shot. His ego punctured.

"Do I smell something burning?" It was the Accounts Head. "Oh... It must be the Hired Generator which is powering our building right now. And by the way, the Generators are still unutilized."
End of Round Seven: Finance Guy 1 vs. Others 6

Round Eight: Second Wicket (The Purchase Head)
"Next, I'll consider Purchase Department.

"I have to admit the purchase cost has gone down. Now, that is the direct cost. It has gone down. Absolutely proper. Now how is this possible? When the cost all over is increasing gradually, how did we manage to reduce the cost? Simple. Prepay the dues! In the past, we used to settle the liability once in seventy five days. Now we pay the advance, not at zero time, but rather fifteen days in advance! That means a whole ninety days in advance. At the average annual purchase cost being around Rupees 4500 Crores, and a reduced credit period by 90 days, we are looking at almost Rupees 1150 Crores in incremental working capital liability. At an average interest rate of 14%, it means an incremental interest cost of more than Rupees 135 crores. Almost 6 times the savings estimated by our Purchase Head.

"If you have any doubts on the computation part, I am sure our Chairman and Sales Head will explain you the computation. After all they know accounting and finance.

Pssssssss........ The Purchase Manager's head was looking down at his feet, searching for something.

"What is that I heard now? By the way, by reducing the number of purchases, we have restricted the number of suppliers. Which means that we have lost the advantage of juggling our suppliers to obtain a better rate in the long run, and also insist on better quality. What should also be remembered that the volume purchased per order has also increased by 50%. What it means is that, we are holding more stock than what we did couple of months ago. This creates a stress on our Stores Department, and the last I heard was that there is very very little space for the finished products now.

"And our Purchase Head had reduced the purchase process by reducing the two stage quality check to a single stage quality and quantity check. Earlier it was done at Entry and also at the Stores Department Lab, using two different samples. Right now, it is done only at Stores Department Lab. Though, this has reduced procurement cost, it has resulted in quality compromise. The Sales Head would confirm that there has been more number of complaints on the quality front."

The Sales Head nodded ever so slightly, acknowledging and worrying what next.

Dumeeel.... The Purchase Manager was holding his hand against his head.

"Do I need to say anything more?"

End of Round Eight: Finance Guy 2 vs. Others 6

Round Nine: Third Wicket (The Marketing Head)
"Next in line is the Marketing Department

"Our products are industrial products. Primarily meant for automotive industry. More specifically, the final producers of automotives - this means, Cars, Two Wheelers, Tractors and Trucks. They are our target people. In total, in our country, there are around 120 Companies which are into such business. Now how do we reach out to them? Through Cricket Endorsements? Through Radio Advertisements? They are meant for products which are meant for ultimate consumers. You do that for Cola and Toilet Products. Not for industrial components.

"Honestly, I don't see any relationships between BCCI Events and the promotion of our products. If at all this has resulted in many enquiries which are actually convertible into sales, I would be surprised.

"Except an obsession to have some celebrity to endorse our product, I personally don't see any justification in going for such endorsements. What business we are into by advertising our products in local television channels, which are restricted to a particular city, and run by the cable operator himself?"

Uufffff..... The Marketing Manager was breathing hard. He was short of breath.

"You need some air." The Accounts Head was addressing the Marketing Head. "By the way, the BCCI events which our Marketing Head was referring to is the Under-17 Inter State Events, which even BCCI administrators themselves don't watch."

End of Round Nine: Finance Guy 3 vs. Others 6


Round Ten: Fourth Wicket (The Sales Department)
"If you can't sell, you can't do business. I concur. But, what should not be lost sight is, if you can't sell properly, you will run out of business. With a recession pretty much in sight, it should be, the entire world is screaming, our credit policies to the customers should be tightened. Instead, we have loosened it. Now consider this. One of the biggest strength for us was our customer base who were paying their dues promptly. Thanks to our stringent credit period of 60 days and good quality output, we managed to collect the receivables in 90 days approx.


"With a relaxed credit period of, hold your breath, 120 days, our sales have surely shot up. What hasn't is the cash position. One need not be an Einstein to figure out that the customers will take a further 10 to 15 days to settle the dues. This means, for a period of almost 5 to 6 months, we should be awainting the customer to pay the dues. Heck! Even the bank considers only 90 days debt, and here we are looking at 6 months. Waiting for doomsday would be shorter.


"This would pretty much result in serious bad debts and price corrections piling upto 10% to 15% of the sale value, effectively nullifying the advantage quoted by our Sales Head. Now that could actually reduce the wait, to the doomsday.


"Now, what this has done is put pressure on our liquidity. There was a time, when we were sitting on a cash surplus of almost 6000 crores. Over the past nine months, thanks to liberal policies of various department heads, we are looking at an Overdraft of around 1500 crores, on which we are paying interest of around 20 crores every month.


"The plans for our capital expansion is also done with, thanks to such policies.


"Need I say more?"


Oooooooooooo.... That was the Valampuri Sangu. Ring tone of the Chairman. His mobile had buzzed, and he snoozed it to silent mode. The Sales Head was looking at his slides print outs for some inspiration and defence. He found none.


"My understanding of Engineering is pretty much zilch. But then, I never claimed to be better at that. And more importantly, it is not my job. But I am good at what I do."


End of Round Ten: Finance Guy 4 vs. Others 6

Round Eleven: Fifth Wicket (The Human Resources Head)
"How do you make the employees happy? By taking him to picnics on weekends? Atleast that's what our HR Head thinks.

"Over the past three months, there have been 9 trips to various resorts over nine weekends. The travel starts at nine pm the friday night, and the tour ends at seven am on Monday morning. Nothing wrong about people going on picnics. But they would definitely prefer going with their family to a place of their choice.

"Three employees over the past three months have quit citing depression. Three out of an employee count of almost one thousand three hundred might sound minimal. But, the fact that there have huge number requests for day off and permission for leaving early, or coming late only indicates a larger malaise. The work schedule, thanks to the revised working hour based incentive programme, has only resulted in fatigue. 

"Gentlemen, all these data is pretty much available in the same ERP system we have installed since the last five years.

"Our picnics are almost on par with business meet, with funny team building exercises and meetings which run to almost seven or eight hours. Eight to nine hours of doing what the boss says even on a weekend! I wouldn't be surprised if some of the employees are going through marital troubles because of this. And such picnics don't act as release of pressure, but only aggravates."

"So you are making an assessment of human resources without having any experience in this matter? Now, what are you? You are some psychologist, eh? You did some HR work? What is the basis for such an assessment? Heresay?"

"Simple. We process their medical bills, and run through their prescriptions, and do a random verification with their doctors, and it is the Doctors who are highlighting these troubles. Scanned copies of such reports are also available in the very same ERP! Before you doubt, if we at the Finance Department uploaded it, it is done by the employees themselves.

"And why did we study this even more? Simple. The medical reimbursements have shot to Rupees 35 Lakhs in the past three months from the usual 13 to 14 Lakhs in the past. And the tours have cost us an average of Rupees 4500 per head per day, and that translates into roughly Rupees 8 Crores of incremental cost, with only incremental pain."
"So?"
"So, it means there has not been any 'maintenance' of cost per employee, it has only increased. And there is only increase in number of working hours, than increase in productivity, since your incentive scheme, for the major part, emphasises on hours spent rather than work done."

The HR Head was looking around for some sort of support from the other department heads. As usual, he found none. He looked back at the Finance Head once again, who smiled at him and continued, "And, based on the documents submitted, except one, all the people in the room have atleast taken part in 3 team building exercises, with the Sales Head taking part in 7 the maximum." The Accountant looked at the Sales Head, and turned his attention the HR Head, continuing "I see that you haven't taken part in more than one such team building exercise?" 

And thats it. The knives were out. And the next fifteen minutes was lengthy discussion on the need for revisiting the HR Policy. Everybody spoke in those fifteen minutes, except the Accounts Head.

End of Round Eleven : Finance Guy 5 vs. Others 6

Round Twelve: Sixth Wicket (The Chairman)
"Anything else you want to state?" It was the Chairman to the Accounts Head.
"I am done for the most part, except one thing, sir. If you permit, I will continue. I understand it is pretty late into the night now."
"What is it?"
"It is about infrequent invoicing done by couple of our Consultant vendors, who are directly handled by you, sir."

The Chairman's eyes opened up a bit, "Yes?"
"Other vendors, I would call up myself. But since, they are from North India, I believe, you are the most capable to handle them."
"Sure. I'll do. We'll talk about it tomorrow." Chairman was hastening the end of the meeting. For the Chairman had realized that the North Indian vendors were based out of Manali, the place where his ex-Secretary was put up these days.

"Thanks a lot Gentlemen! We had a very productive session and discussion on what needs to be done. I am also aware of what has taken actually taken place over the past time periods. I would expect all the Department heads to pull up their socks and get their acts together, and stop two timing me. So, all of us will meet again next week, to review the HR Policy and revise a new incentive programme. Post which, we will meet once again three months later to review the performance for the next quarter. Good night gentlemen!" It was almost 3 am the next morning.

"And I would like to have a word with you in person." The Chairman was saying to the Finance Head.
"Sure sir." 

End of Round Twelve: Finance Guy 6 vs. Others 6


Round Thirteen: The Surrender (The Knockout Punch)Both of them walked to the Chairman's Car.
"Thanks son! These fellows were two timing me. If I decide to do anything based on their inputs, I can pretty much write off my investment in the Company. Nee illaati, enna ellaarum aemaathirupaanunga da. "

The Finance Head just smiled to himself.

"But how did you manage all this?"
"We work. We don't shout about it."
"Oh..."
"Yes Sir. We work. And we work with numbers. We know how they behave. Also know how to make them behave."
"Oh..." The Chairman was wondering if it meant more than what he conveyed. "Nice work. And Goodnight son."
"Thank you sir. And Goodnight"
End of Round Thirteen: Finance Guy 7 vs. Others 6

Message to the World: YOU DON'T MESS WITH THE FINMAN!

Note: The title is inspired from the movie "You Don't Mess With The Zohan" starring Adam Sandler.

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