Why P&L Analysis must be done EVERY MONTH?

One of the best management practices, most of the smart CEO or business head use to do every month is review P&L (Profit & loss) statement along with the key people. In fact, some organizations have a habit of reviewing P&L before 10 the of every month and accordingly all the financial accounting is completed, and the process of bill collection and accounting is set in place.

Benefits of doing P&L Analysis every month:

1. As a business head, notionally, you come to know the business profitability either positive or negative in the month .that give you more response time to take countermeasures in the subsequent months.

2. Analysis of P&L every month will give you a lot of insight about your profitable product mix. For example, in one month, an organization made High turnover compared to the previous month, but the Operating margin is lesser than the previous month. When analyzing the expenses, there is not much variance between months. However, when the team analyzed further on the product mix, they realized that even though they produced more of a particular product, say X, the price was low. The team had realized that more you produce product X, more loss the organization makes. This kind of analysis will give a lot of insight about your product mix and accordingly, you can take a call on optimizing the product mix.

3. Also, when you analyze P&L along with cost variance of each expense, that improves the cost consciousness in the organization, and in fact, you can take countermeasures to control the cost. We are witnessing in many organization,, where the business head reviews the P&L every month, the culture of the organization also moves towards cost consciousness.

Limiting factors of not doing P&L review every month :

1.one of the reasons people use to say is P&L statement may not reflect the real numbers as there is variation in inventory accounting, tax provision, depreciation, etc.

Yes. As said this P&L statement is just notional and indicative of your operational performance only. In the year-end, with all provisions, your auditor will make right P&L including right accounting principles. This monthly P&L will give you an instant picture of your business performance so that you can take timely actions.

Regarding inventory accounting, when you regularly do every month, will get eventually normalised. You need to ensure that you are using a standard format and input/output mechanism and the source must be the same. For example, if you are using TALLY software, use the same source and format/assumptions to prepare P&L statement every month

2. Lack of discipline on accounting all the bills on time and preparing P&L statement on time.

Rather than blaming the people and system, it is the discipline of the business head in showing interest to analyze the P&L every month before 10th matters a lot!!



The point is reviewing P&L analysis is a prime responsibility of business head, and it must be done every month for taking corrective action on business performance on time!

Simple checklist for identifying ergonomic risk in workplace

As we discussed in Why Ergonomics is not given importance in SME organization? a simple checklist with little awareness to engineers, shop floor operating team will help the team to identify the ergonomic risk in the workplace. This awareness further triggers the improvement in workplace re-engineering by the operating team.

In fact, REBA (Rapid Entire Body Assessment) is a structured approach to identify the ergonomic risks in the workplace, the given below checklist is easy to understand and quick guide to identify the fatigue in the workplace by the operating team as we experienced in more than 10 + SME clients.

Ergonomic Assessment Checklist

1.Awkard Posture

2.Handling loads and moving

3.Repetitive physical activities

4.Environment and unfavorable layouts

Why need to elevate the operator's role in SME organization?

In the entire value chain, most of the value addition happens in shopfloor while converting the input into output. Mostly value addition is being done by the operators. 

Some of the common complaints or problems faced by the management team are

1. Difficult to source the skilled operator 
2. Cost of operators is increasing 
3. Operators not  staying for long 
4. Rejections/reworks are more and being identified by the Quality inspectors before despatch

Even though skill gap, supply vs. demand of skilled people are external to the organization, some of the factors are being governed by the organization, and if the organization focus more on those factors, the above problems can be managed well.

some of the problems like cost/quality issues/retention are all influenced by the internal environment, culture and the management related.

For example, driving efficiency and bringing down the cost of engaging operators is management driven. One of the pitfalls we observe in most of the organization is the defining the roles and responsibility of the operator from day one. Operators are being recruited as the person responsible for operating the equipment only. He is expected only to perform loading and unloading the components. Quality of the output is not expected out of him, and there are other agencies or inspectors are in charge of the quality control of the product produced by the operators. 

Also, the operators are not encouraged to keep the workplace right regarding housekeeping and checking some of the basic equipment parameters on a daily basis.

A shift is required to position the operators as the complete in charge of production output as per standard both on quality and efficiency. He has to be trained and instructed from day 1 as complete in charge of his workplace.

Benefits of redefining or elevating the role of the operator:

1. Engagement and ownership increase as human beings expect more challenges, responsibilities, and appreciation.
2. It is easy to improve the quality when the issues are detected and corrected at SOURCE and by the PRODUCER than by any other person, at the remote location and time period.
3.when the efficiency increases, cost of operation comes down

The point is to elevate the role of operators to reap the benefit of reducing the operations cost and increasing the engagement!