the Monday Musings column from that consultant bloke

Revenue is one of the key components of profit, and therefore its perceived position as the lifeblood on business is reflected in the amount of money spent on trying to generate it; sales and marketing, and all of their associated costs make a reasonable dent in a company’s expenditure and so does the amount spent on training the people involved. Customer relationship management (CRM) is a big thing.

Now profit, as we all know, is what’s left over from the income when you’ve paid all your bills, but it is cash flow, or rather lack of it, which is the biggest killer of business. So you need profit underpinned by a healthy cash flow to survive, and cash flow is kept healthy by making sure that you’ve got your income in the bank in time to pay your bills.

And yet so many businesses just miss the whole point. They focus fairly lavish attention on bringing money in with little thought as to what is going out beyond the occasional budget cut or belt tightening exercise.

One of the key problems is silo mentality. When I am working with a group of buyers I’ll always ask how they see the sales teams that they have to deal with. The response is usually fairly hostile and rarely complimentary, but when you point out that they also have a sales team it comes over as though you’ve just told them that they have an uncle in gaol for murder.

It isn’t quite as bad talking to sales people about buyers, but both sides miss two important points. Firstly that the business that they work for will have both buyers and sellers that should be joined up and secondly that whilst the one group is trying to apply CRM to the buyers that they deal with, the other group is having CRM applied to them, but usually with little being done to equip them to get the best out of it. (In the reverse direction we call it Supplier Relationship Management or SRM).

You will also find frequent examples of buyers and sellers working against each other. Not deliberately of course, but because there isn’t sufficient recognition of the business drivers nor recognition of each other’s roles. In the service sector I’ve often seen companies that have sold solutions against a set of service levels that their supply contracts can’t sustain. Both sides are getting a pat on the back for the respective deals and nobody sees the conflict until sometime downstream when the end client is getting dissatisfied.

It should come as no surprise that the best examples of companies that balance efforts on what they spend and what they earn are often in the retail sector. Just think Tesco or Wal*Mart for example. They both manage their supply chains very well, and there is a constant and positive dialogue between all the various functions. Everyone is focused on taking revenue and squeezing as much value as they can from the transactions.

So here’s something that you can do this coming year. Buyers and sellers, seek each other out in your business and start having some meaningful dialogue.  You will better understand how you can help each other succeed on behalf of your employer, but you can also help each other understand how the other works.

SRM is a very worthwhile area to be investing in. I’ve written here about collaboration being a way to move forward from recessionary times and working together in the supply chain is common sense anyway. I think that SRM could be a big thing in 2011.