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A performance monitor is necessary
for a company irrespective of its size. It serves as a means of evaluating the
activities of the company, whether or not it is in line with its strategy and if
at all the strategy is working.
Our team of consultants at Allo SBT will review your company performance in
terms of the cost and value drivers of the business and how to best maximise
shareholder value.
We will specifically look at:
1.
The source of capital: This will be looked at in two categories;
(a)
The cost of capital i.e. whether or not it varies directly with the source of
capital. In most cases it does meaning the higher the amount borrowed, the
higher the amount to be paid back. Therefore look at the debt to equity ratio of
the company (gearing ratio).
(b)
The cash outflow of the company as a result of capital repayment.
2.
The capital expenditure of the company:
Does it increase shareholder value or decrease the companys cost? i.e. lead to
an increase in sales value or a decrease in working capital by reduction in
stock retention levels or more so an increase in the productivity of labour.
3.
If the company is about to make a new capital expenditure: The effect it will
have on the fixed cost in relation to the variable cost of the company. Hence,
the resulting impact on sales levels.
4.
The cost structure of the organisation: This is in terms of the assets and
liabilities of the company (Current Ratio).
5.
Where does the Value / Cost driver of the organisation lie: If the value/cost
driver is outside the company, then it will be best to constantly improve
relations with the suppliers or otherwise. It might also be worth bringing the
particular activity into the company.
6.
The bargaining power of the suppliers and buyers and the existing relationship
between them.
7.
The business strategy in place. That is, if it leads to added value to the
company.
8.
The internal control systems in place. What measures of cost control have been
put in place? How is information generated and stored in the organisation? Is
the decision making process based on information generated as a result?
9.
The influence of time:Over time, the key cost or value drivers of the company
may change. How will the company respond to these changes and what means of
replacement have been developed?
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