2003: Starting with Foreign Trade

Chapter 163 The Troubles of Factory Expansion

How much money do we currently have in our company account?

"This month's salaries have all been paid out, and there's still over 800 million yuan left. Boss, do you want to see the detailed records? If so, I'll go up and get them."

"No need, let's go up together."

A company's working capital refers to the cash funds it needs for its daily operations. Working capital is an important guarantee for the normal operation of a company and one of the core aspects of its business management.

The management and use of a company's working capital are directly related to its production, operation and development.

Generally speaking, for a company with an annual output value of less than 10 billion yuan, a working capital ratio of 20% to 30% is considered relatively healthy. However, there are some further subdivisions within this range depending on the industry and the payment cycle.

Taking Taobao stores as an example, the payment period for Taobao stores is generally around 10 days, so a Taobao store with an annual output value of 100 million yuan only needs about 3 million yuan in working capital.

Businesses like retail stores and platforms, which generate large daily cash flows, don't need working capital at all; they can even earn interest on the large amounts of currency they collect.

The reason why the manufacturing industry faces such a tight cash flow is because their payment terms are very long, requiring a large amount of working capital reserves. Once the cash flow cannot keep up, the company may face the risk of bankruptcy.

The capital cycle of manufacturing enterprises is as follows: 1. Procurement process: monetary funds are converted into raw materials; 2. Production process: raw materials are converted into semi-finished products, and then gradually processed into inventory goods; 3. Sales process: inventory goods are converted into monetary funds.

The tension stems from the fact that there are second and third steps involved, and some companies even have payment terms exceeding one year, naturally increasing their financial pressure.

On a side note, how do you determine the approximate net worth of a business owner who runs a real business?
Generally speaking, conservative business owners typically have about 80% of their wealth in circulation, while aggressive ones may leverage their capital by 2 to 10 times. Therefore, one can roughly estimate their net worth by using their amount of circulating funds.

Therefore, a business owner with a net worth of 100 million yuan is already at his best if he has 20 million yuan in cash. His life is not as carefree as those individual investors in the stock market who can easily spend hundreds of millions to buy stocks at the limit up price.

There's no other way; the money needs to be used for business operations, otherwise this fortune of 100 million would be nothing but a mirage.

Flash Auto's sales in 2005 should be around 6000 million yuan, with more than 800 million yuan in working capital on the books, which is about 13% of its cash reserves, making it relatively risky.

However, considering the current supply shortage and the payment period of only one month, the 800 million yuan in working capital is still sufficient to maintain operations.

From this perspective, Liu Meilin is a very competent accountant.

Tan Jincheng has also put a lot of effort into how to avoid financial problems and prevent financial embezzlement and absconding.

First and foremost is internal control. Other departments can be a bit more casual, but Tan Jincheng is extremely meticulous when it comes to the accounting system, control environment system, and control procedures. With accounts receivable amounting to hundreds of millions or even millions every month, if these are not properly controlled, there is a real possibility that the money could be embezzled and the perpetrators could abscond.

Take July, August and September as an example. The company received more than 2400 million yuan in payments. If this was not managed well, it would be very dangerous. Tan Jincheng still couldn't bring himself to consider people's feelings when it comes to such a huge amount of wealth.

In addition, the company's finance department has a clear division of labor, with positions such as supervisor, accountant, and cashier all in place. As the company grows, these labor costs cannot be cut. A clear division of labor between superiors and subordinates, with checks and balances and cooperation, is the perfect arrangement.

Although Liu Meilin is the head of the finance department, there is another cashier. In addition, the legal representative's seal is always with Tan Jincheng. When issuing checks, both the finance department's seal and the legal representative's seal must be affixed at the same time for the check to be valid.

The same applies to online banking payments; Liu Meilin is responsible for making payments, and Tan Jincheng is responsible for reviewing them; both of them must be approved before the funds can be disbursed.

In addition, cash management is very strict, with a cashier responsibility system in place, and cash received indirectly must be transferred to the cashier in charge immediately.

Of course, like Wang Guoxin, Tan Jincheng would also give the finance department a certain amount of discretionary power. This amount would allow them to feel the value and status of their work without giving rise to greed.

There's no need to do anything that tests people's moral character; improving the system is the best approach.

On the other hand, it is essential to learn how to read financial statements. A boss who cannot read financial statements is unqualified. Tan Jincheng had business experience in his previous life, so he didn't have any major problems with this.

The most important thing is to establish an awareness of paying taxes according to law and avoiding tax risks. In the process of market development, there are countless companies that have failed because of violations and wrongdoing. In serious cases, the financial and management personnel of the companies may even face imprisonment.

Tan Jincheng, as a reborn individual, was more vigilant about this than anyone else. So many celebrities in later generations had fallen because of this. In the era of big data, if you don't cultivate a good tax awareness, you're really digging your own grave.

"The loan for the new factory will come through after the National Day holiday. That loan will be used specifically for the construction of the new factory. We will pay off the short-term debts to Jinpeng Trading and Mingcan Moulding before the end of the year, and then pay off the rest slowly."

"How much did you borrow for the new factory?" Liu Meilin asked curiously. "3000 million yuan, that's enough," Tan Jincheng replied with a smile.

Liu Meilin nodded without speaking, but in her mind she was thinking about how to make better use of these loans and the loans collected in October. Compared with her previous company, Flash's monthly cash flow was already very large.

If this continues, I won't be able to do part-time work!

This boss is incredibly audacious. The factory is now over 1400 million yuan in debt, with short-term debts reaching 800 million yuan. He has also taken out a 3000 million yuan loan, bringing the company's debt to over 4000 million yuan. This is truly a headache.

A company's finances are not just about receiving and paying money and issuing invoices. They also involve many aspects such as annual budgets, expenditures, assisting the boss in carrying out their work, and maintaining a good balance between income and expenditure.

In short, you must use the money that the boss brings in reasonably, and the same goes for borrowed money and interest; there must be no mistakes.

This is probably why most finance positions are held by women. Compared to men, women are more meticulous in this area. As for Tan Jincheng personally, he prefers local female finance professionals who are between 30 and 40 years old and have families.

While they are in their prime, they still need to work hard to make a living. In addition, they have more concerns about their families living locally. This is probably what is known as their Achilles' heel.

"Okay, I will handle it. Please rest assured, Mr. Tan."

"Yes, the workload will be heavier next year. I'll find two more subordinates for you and Sister Gu to help you and Sister Gu. Also, we'll discuss salary and benefits with you and Sister Gu. Sister Liu, you can also mention any other requests you may have."

"Thank you in advance, Mr. Tan. Just wondering, the new factory is much bigger than the old one. Will we have to move to the bonded zone to work?"

Tan Jincheng nodded: "Yes, the office staff will all have to move to the bonded area to work. We'll treat this place as a branch factory and just leave a branch factory manager to manage it."

"Sister Liu and Sister Gu, you should also be prepared for this. I will also inform the other office staff later."

“I understand. It’s fine for me since I have a car, but it’s probably a bit of a problem for my colleagues who don’t have cars, since the bonded area is relatively remote.”

Tan Jincheng stroked his chin and pondered, "That is a problem. I remember there is a living area in the bonded zone. I'll see if I can rent a dormitory there and arrange for the employees to move in. As for transportation, we can cooperate with the bus company for the factory shuttle bus, and we also need to recruit two more drivers."

"It's good that President Tan has this in mind. I was just reminding you that the South District is all factories and there are no residential areas at all, which is a bit inconvenient."

"Okay, make a contingency plan. For the factory shuttle, let's go with six buses. Also, make a budget for the drivers' wages. As for the housing, I'll ask around and find out how much it costs to rent a building. I'll give you a figure later so you can make a budget."

These days, we really can't afford to buy factory buses. Those 50-seat buses are extremely expensive, costing around one or two million yuan each. If we have 300 employees, we would need six buses to avoid disrupting their work hours, which would cost over 1000 million yuan.

Therefore, cooperating with bus companies and utilizing their abundant transportation capacity is the best approach. If that's not possible, buying their used, obsolete buses is also an option.

As the factory grew larger, so did the problems. Once the new factory was established, the two factories together would have nearly 600 employees. Collective dormitories and factory buses were essential; otherwise, unified management would be impossible.

Starting next year, Flash's monthly production capacity will reach 2.8 units, with an annual output value of over 500 million yuan and more than 5 employees. This is far beyond what Tan Jincheng could control in his previous life, and many things will require learning as they go.

In addition, with more personnel, security work needs to be taken more seriously. After all, we are producing electric scooters. If we are not careful and hundreds of scooters are stolen, the financial loss is a minor issue, but the disruption to the agreed delivery date would be a real problem.

There are many things that Tan Jincheng cannot consider all at once. In the later stages of a company's development, having an excellent team to help the leader fill in the details becomes especially important.

Forget it, I'm not going to think about it anymore, the more I think about it, the more my head hurts.

"I'll be going now if there's nothing else. Sister Liu, you can continue with your work. I wish you a happy National Day in advance," Tan Jincheng said as he stood up.

The finance department is usually quite busy at the end of the month, and Tan Jincheng was too lazy to take up the other party's time, so he decided to talk about it after the National Day holiday.

"Okay, Mr. Tan, take care. Happy National Day to you too," Liu Meilin said with a smile.

Workshop employees only get three days off, but office staff get five days off. They start work on October 6th, which is a good long holiday and also the last long holiday of the year.

(End of this chapter)