Productivity and Financial Analysis

A productivity analysis is a cost to benefit analysis which looks at the means of production of the product or service, the labour and raw materials required together with the amount of capital utilised in order to produce the product or service for sale to the end user.

The purpose of the report is:

• To ascertain what is the return on total capital employed?
• Are employees’ skills being maximised and used profitably?
• The utilisation of automation and could such automation be expanded?
  What products or services are most profitable?
• Is it possible to expand the profitable products services into other areas?
• Are any products or services loss making? If so, is there any benefit in continuing with those products or services.

A good productivity report will also include a human resources and manpower analysis.
One of the hardest manpower issues to measure, is how much benefit the administrative staff are to the company’s profitability.
Are the administration staff draining the company’s cashflow?

The number of staff a corporation employs directly affects:

• The office expenditure e.g. cost of office space, equipment, electricity etc
• The amount of PAYE, National Insurance, pension contributions and other employee benefits the company must pay.

Even the cost of the Christmas office party can have a negative impact on cashflow if the corporation is only just breaking even
Flexibility – how many hours do you really need that employee to work. Could their job be outsourced without any detriment to the business?
Many companies choose to rely on business software programs in order to produce these figures, however these software programmes are limited in the data they produce and do not have the human expertise to analyse the numbers. The software reports only provide half of the story, expert human analysis is the most important part.
At JTE we can prepare monthly or quarterly productivity reports which allow you the business owner to monitor the productivity of your business and quickly focus on where changes need to be made to maintain and improve profitability.

Financial Analysis
The Financial Analysis Report will set optimum targets for the future and identify the point at which capital employed enjoys MAXIMUM RETURNS.
Once the Productivity Analysis Report has been completed, the data can be analysed and this will include:

• Looking at the corporate revenue streams
• How is the revenue allocated amongst the existing customer base?
• Which employees produce the highest revenue?
• What is the gross, operating and net profit margins?
• How well are the company’s resources being used and where and how could they be better utilised?

Capital efficiency – investigating every aspect of capital employed.
Liquidity analysis – cashflow being the life flow of all businesses it is essential to consider what monthly peaks and troughs occur in the business.
Breaking down each cost centre and seeing where savings can be made.
Identifying the most profitable parts of the business and see how and where expansion could take place
The quality and content of the financial analysis report will greatly assist management in constructing and adopting their financial plan for the future of the organisation.
At JTE our business consultants can prepare monthly or quarterly financial analysis reports which allow you the business owner to identify how profitability can be increased and where expenditure can be decreased.