Initial Customer Issue – Diamond S Meat Company was a 12 year old organic ranch and meat packaging company. Despite Profit and Loss Statements showing consistent profitability, the company was always running out of cash. The company’s Fiscal Policy was not effective and their Balance Sheet didn’t accurately reflect the company’s performance.Financial performance is almost always the result of another issue as Financial Statements are lagging indicators. We performed a 3 day BizVision analysis, during which we identified a number of causes for the financial issues.
First, the meat production and sales procedures were not consistent or accurate. There was very little control in place for inbound weight measurement and understanding the actual waste losses during the conversion of a whole animal to the finished product. An antiquated algorithm was used to calculate the losses, but its accuracy or consistency was not being monitored. Second, the inventory control system wasn’t properly tracking inbound and outbound prepackaged products being purchased from suppliers. Third, the QuickBooks systems acted more as a checkbook and the Chart of Accounts was not providing support to proper metric review. There was no centralized data management for Purchasing, Accounts Payable, or Accounts Receivable.
Solution – We began to make corrections to the company’s Chart of Accounts first. We reengineered the COA to support daily, weekly, and monthly reporting requirements with more actionable data for senior leadership.
QuickBooks is a powerful tool with many available add ons. One of the add ons we used is the inventory feature. By integrating their inventory function to QuickBooks, we can better account for the meat packaging process. Both inputs and outputs are able to be tracked and conversion metrics are streamlined. Another QuickBooks add on we implemented was the Point of Sale System. The POS system through QuickBooks gives more inventory forecasting and reporting functionality. This key system proactively identifies and solves inventory and operational issues which means the customer experience is vastly improved. Process wise, we corrected the way animals were being measured to reduce losses in sales. By properly weighing the animals, the company was able to increase revenue without actually raising prices. Additionally, we replaced the outdated formula for weight conversion with a Business Process Reengineering process that better analyzed actual weight measurements at various stages in the production process.
Improved Key Performance Indicators gave senior leadership better and more accurate information regarding sales tracking, purchases, and inventory. Having more up to date metrics gave purchasers better data from which to base buying decisions. Better sales tracking eliminated lost money and increased daily receipts. The overall improvement in this process shortened the time Accounts Receivables went unpaid which greatly improved cashflow.
Business Impact – Without increasing prices, revenue increases accounted for 270% of the total cost of this project. Within six months of project completion, Diamond S Meat was able to reduce costs by another 17% because of the change in resource planning and inventory controls.