Let's get started. Have you ever noticed that the business savvy of the world's best CEOs seems like a kind of street smarts? They sense where opportunities are and how to take advantage of them. And their companies make money consistently, year after year. How different is it to run a big company than to run a small injection molding shop in the middle of the U.S.? Not very much.
The best CEOs have a knack for bringing the most complex business down to the fundamentals - and these are the same fundamentals for the CEO or manager in a small injection molding company. They have business acumen, the ability to focus on the basics and make money for the company. This bi-weekly column will capture these insights and explain in clear simple language how to do what great CEOs do instinctively and persistently.
First, let's audit your business. The new audit philosophy is to focus more on effectiveness and continuous improvement as companies become more performance-based. There are essentially four types of audits: financial, product, process and systems.
- A financial audit is conducted by personnel trained in accounting processes to provide a true representation of a company's financial health.
- A product audit is a detailed inspection of a finished product prior to delivering the product to the customer. Product audits are typically customer-oriented.
- A process audit examines an activity to verify that the inputs, processing and outputs are being done according to defined requirements. This type of audit is a verification of the manner in which employees, material and machines mesh together to produce a product.
- A systems audit is known by several other names. Among these are quality system audit, management audit, quality program audit, and systems & procedures audit. Its objective is to examine the entire organization system.
Section 404 of the Sarbanes-Oxley Act (SOX) mandates an effective system of internal control. The purpose of internal control is to aid in achieving a company's goals and objectives, assist in reliable financial reporting and compliance, lead the company through its day-to-day operations and provide rules of guidelines for activities that identify and mitigate risks. SOX requires companies to ensure working systems support the numbers. ISO standards for quality, safety and environmental auditing accomplish much of the same, but this synergy has largely gone unnoticed. Combining SOX and ISO audits would be not only compelling, but also cost effective.
Also, improvements stemming from these systems contribute to financials and affect the P&L (profit and loss) by reducing the cost of operations, production and transactions. Other positive impacts can be reduced or better use of head count, lower cycle times, increased sales and revenue, reduced cost of supply, more effective control of logistics and cost-effective management of inventories. Lean concepts are often used as tools for creating these improvements.
The bottom line is that a profitable company specifically calls for quality control of not only the financial reports, but also the processes and systems that combined to provide input to those reports. We'll be covering these topics in more depth in the coming weeks.
About the author: Lewis Yasenchak works as a consultant with small-to-mid sized processors, moldmakers and other precision manufacturers to help them "implement quality at the source" rather than catch mistakes once made, and also to minimize waste by meeting and exceeding ISO Quality Management Systems. Contact him at T: 706-694-2977 or [email protected].