Improve Asset Utilisation
To improve asset utilisation, a business owner needs to look at how each major asset class of the business is being used, how that use adds value to the customer and how that can be increased further. Take for example a school. You will often see a school now earning additional revenue by hiring out its sporting facilities and gymnasiums between 6 – 8.30am or, the class rooms for mature age teaching from 6 – 9 pm . This increases the utilisation of these facilities from their typical 8 hours per day to 13. Opportunities to improve asset utilisation can be found in:
- Applying for growth finance, to fund the needs of increasing the revenue of new clients that will require funding for the 60 days of credit that might be required to make, sell and distribute product to meet their needs
- Careful working capital and cash flow management to ensure that debtors are collected promptly, terms are tightly defined and simply communicated
- A review of Inventory Management to identify the number of stock turns per year for each product group or customer group, to identify Slow and Obsolete Stock (SlOb) and have a focused process to sell it through.
- The information and Information Technology that has been built up. This could lie in the insights that can be drawn from our sales, service, usage, processing data that could give us a competitive advantage or provide us with new ways to become more effective
- How we manage our facilities; ensuring that they are being well maintained, renewed and utilised to gain the greatest return from the space/capacity therein
- Our Web presence which is also a public face of the business like a physical footprint that the customers/suppliers and other stakeholders see and use to form opinions of or interact with our business. This might include what value we add to the customer through the web, how we stimulate and convert sales (e.g. through shopping cart optimisation), self serve for information that either becomes a reference source for them, or a more effective business process for their business interactions.
Reviewing and tuning each of these six elements can drive significant improvements in Asset Utilisation, Business Performance, and quality of the balance sheet.