Financial Benchmarking

The Role Of Finance

Skills for Logistics - the role of finance

The logistics industry share a number of characteristics with other industries. These include:

• Complexity
• Competition
• Pressure on margins
• Changes in industry structure
• The need for existing owners to exit with value
• Regulatory interventions

But what's this got to do with finance? A lot - particularly for smaller organisations that are experiencing these issues and don't currently have the resources or knowledge to respond.

A recent ACCA survey pointed out that in SMEs, in particular, the development of the finance function isn't the result of growth but it is typically the catalyst for this. In other words neglecting the development of finance will hold back growth and success.

Intuitively this is obvious - logistics companies need to control costs, to manage margins, to bid effectively, to have an optimum capital structure and to maintain good relationships with funders - all things which normally benefit from financial input.

It's been recognised in many industries for years that you can't manage your business just on financial metrics on their own. This led to the development of a concept which has been embraced by most large organisations called the balanced scorecard. The analogy is that you cannot drive a car by looking solely in the rear view mirror, you have to look where you are going. Financial results are the equivalent of looking through the rear mirror - they tell you what's happened but not why, nor what caused it, nor do they help achieve your future plans.

Metrics like quality, customer satisfaction, innovation and staff morale, competence and turnover all contribute to future success - and reputational damage can occur if there is a focus on costs to the exclusion of factors such as safety, community relationships and regulatory compliance. There needs to be a balance - hence the term balanced scorecard.

So what is needed is an effective way of measuring both financial and non-financial key performance indicators and putting in place a process for identifying them, measuring them, reporting them and most importantly of all taking action on them.

Skills for Logistics is well placed to help in this.

On our panel we have Kevin Bounds. Kevin authored a recent report for the Institute of Chartered Accountants on the balanced scorecard and had previously co-authored its best practice guide.

Kevin is an expert at practical implementation of these management systems, having worked with companies small and large in the UK and overseas.

You don't need perfection - but you need to be better than the competition and Skills for Logistics' diagnostic tool and programme will enable you to see where you need to improve and will provide both quick wins and longer term improvements to enable you to respond to the challenges across the industry.

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