Optimization of enterprise costs during a crisis. Ways to reduce unaccounted for water consumption in public water supply systems Reducing the cost of engaging external consultants and independent experts

Cost + others

RESULT

(-)

1/2 STEPS – OWN NON-CURRENT AND CURRENT ASSETS

The postulate “Life is good.” The purchased (or produced) product is sold out. Demand exceeds supply. The entrepreneur is happy. All stocks are currently sold out, accounts receivable no, trade is carried out only upon actual or prepayment, as well as by appointment.

DDS

INCOME (MONEY`)	EXPENSES (MONEY)
Sales revenue
	Acquisition of non-current assets
RESULT

STEP 1 – DEFICIT OF OWN WORKING CAPITAL

Postulate: “Greed is good. Greed is right. Greed exalts man. Greed pays."

The entrepreneur is fed up with his fixed size of his business. He can earn more. To increase the turnover of an enterprise, it is necessary to increase working capital, and it is also necessary to update fixed assets. Your own money is no longer enough, despite the fact that it has already been spent on non-current and current assets and is already in circulation. The fastest and easiest way is to increase Current assets due to Debt capital through Deferred payment to the supplier. Short-term debt appears on the balance sheet accounts payable. Now a payment calendar should appear to control timely payments to suppliers for goods supplied on credit, so as not to delay payments.

DDS:

INCOME (MONEY`)	EXPENSES (MONEY)
Sales revenue	Cost + other expenses
	Acquisition of non-current assets
RESULT

Uentrepreneur has a large choice of ways to increase the turnover of the enterprise. This can be not only a deferred payment from the supplier, but also bank loans, or loans from third parties, or attracting a partner to the business. Risks at this stage are minimal; mistakes that could complicate the work of the enterprise and worsen the result have not yet been made.

STEP 2 - INCREASE COSTS WITH INCREASED TURNOVER

Postulate: “An increase in turnover always leads not only to an increase in revenue and profit, but also to an increase in costs.” Anyone who is not ready to control, plan, minimize and limit them risks huge financial and economic problems. At this stage, budgeting should appear in the enterprise in order to accurately correlate income and expenses with each other and their receipt over time.

As an entrepreneur increases turnover, distribution costs increase: logistics costs. Appear: defects, illiquid assets, mis-grading. The cash flow at the output begins to gradually decrease by the amounts arising from the increase in costs during logistics, frozen in defects, illiquid assets, and re-grading. The entrepreneur is not yet ready to make unpopular and drastic decisions on this issue; all this hangs on the balance sheet. The markup exceeds the amount of losses, DDS remains positive.

DDS:

INCOME (MONEY`)	EXPENSES (MONEY)
Sales revenue	Cost + other expenses increase
	Further acquisition of non-current assets is possible
RESULT	(+) revenue exceeds expenses

STEP 3 – ACCUMULATION OF COSTS, APPEARANCE OF RECEIVABLES

As old man K. Marx used to say, “The basis of any large capital is crime.”

At the heart of the movement cash lies another imperishable postulate:

“MONEY – PRODUCT – MONEY”. And this always assumes that MONEY is always greater than MONEY by delta (margin). The size of the delta is almost equal to profit minus costs.

Thus, an ideal deficit-free cash flow is obtained - i.e. cash flow in which the outgoing cash flow is always greater than the incoming cash flow cash flow, and without attracting additional funding.

To increase the sales market, a business plan is being developed. In order to retain regular customers, the entrepreneur begins to offer goods for deferred payment, and he has short-term receivables. A cash gap appears between the transfer of goods for sale and the receipt of money after its sale by debtors. To close the gap, the entrepreneur is forced to take out loans. They may also continue to increase non-current assets. DDS is reduced and adjusted for the amount frozen in scrap, illiquid assets, mis-grading and receivables.

DDS:

INCOME (MONEY`)	EXPENSES
Revenue	Cost + other expenses
	Acquisition of non-current assets
RESULT	(+) Revenue exceeds expenses

STEP 4 – FORMATION OF A DEFICIT OF BORROWED WORKING CAPITAL

Postulate: “Money, like drugs, can be fast or slow, cheap or expensive.”

Entrepreneur sitting on a needle borrowed funds and so far he enjoys it. At this stage, with each new cycle, absolutely all indicators in the enterprise increase.

Inventories in the warehouse increase, but the quality of purchases and assortment decreases due to an increase in the volume of supplies.

The entrepreneur begins to give the goods on deferment, including to unknown buyers. Due to competition in the market, old buyers have to reduce prices. The markup ceases to cover the entrepreneur’s losses from freezing funds in current assets: inventories, defects, illiquid assets, re-grading, accounts receivable. Bad receivables appear due to the lack of analysis and monitoring of the financial condition of debtors.

One way to solve the receivables problem radically is Factoring. Of course, it is an effective solution to combat cash gaps and accounts receivable, and increases turnover. Some also offer accounts receivable administration. But the effect of factoring will be short-lived. And it will be the same as if someone addicted to heroin is given cocaine. The short-term result will be positive, because adding fast, expensive factoring money to slow, cheap credit money will only have an effect in the short term - 1-2 quarters maximum. But it will not solve the problem radically.

DDS:

INCOME (MONEY`)	EXPENSES
Revenue	Cost + other expenses
	Acquisition of non-current assets
RESULT	Maybe (+), if the market situation allows you to receive a high markup and profitability does not fall, even despite hidden and obvious losses

STEP 5 – DEFICIT OF BORROWED WORKING CAPITAL

Postulate: “When you get on drugs, the main thing is not to rush.”

At this stage, the Enterprise is already an experienced drug addict. Sits on the needle of borrowed working capital. However, it works. The machine for moving money, goods and generating losses is in full swing. If market conditions change and trade margins fall, the risk of loan default increases to at least 50%. It all depends on who and how will behave in a given situation.

Some of the funds are frozen in illiquid assets, defects, mismatches, some of the funds are frozen in accounts receivable and bad accounts receivable. The company has an increased demand for credit funds to replenish working capital due to their shortage.

In parallel with the increase in lending limits, another long-overdue internal process begins - cost reduction. Since it is easiest to cut the one who is nearby, the process begins with a decrease wages to the staff.

This in turn leads to the formation of two parallel opposition movements in the collective. “Movement of personnel in nature,” who go to other places, often with the same money. And “The movement to plunder the loot, or the expropriation of expropriators in the name of compensation for their losses on wages.” In this movement, people so dashingly and with such imagination begin to rob the owner that you are simply amazed at the talent of our people. Moreover, if earlier this was done to increase their average income, sometimes not tied to the profit of the enterprise, now this is done for purely ideological reasons.

When the markup received from sales, as well as borrowed funds, is not enough for timely settlements with suppliers and banks, there is a shortage of borrowed working capital, a liquidity crisis of the enterprise and default. Curtain!!!

Communication between the client and the bank at this stage is not a spectacle for the faint of heart. In some places they are more reminiscent of a conversation between a Huckster and a Drug Addict. The borrower can use the following words and expressions: “We’ll take it at any percentage!”, “No market, you’ve known me for a long time”, “We need it urgently!”, “Really, how much can you give quickly?”, “How quickly can I can I get this money?”, and finally - “What exactly do I need to do to get this money faster?”

An attempt to solve all the accumulated problems by obtaining new loans and refinancing old ones does not yield results.

DDS:

INCOME (MONEY`)	EXPENSES
Revenue	Cost + other expenses
	Acquisition of non-current assets
RESULT	(-) Expenses exceed income

Diagnosis. Urgently requires hospitalization and treatment in a drug treatment clinic at the place of residence.

Methods for treating dependence on borrowed working capital.

There is no panacea, but there are solutions that can reduce the intensity of passions.

1. In various banks, the calculation of the credit limit for replenishing working capital may be limited to 50-70% of the average monthly turnover. This mechanism does not work because There are other banks with other methods, ready to give more or more. You can also negotiate with suppliers and increase your lending limits. Factoring does not require collateral and turnover on the current account, but increases the overall debt burden of the enterprise.

This conflict with the overall debt burden can only be resolved by the enterprise itself by limiting its borrowings. Banks can limit or reduce limits in fact after 1 month - after reading the quarterly reports, there are no more mobile and objective methods for monitoring the financial condition of the borrower. If the borrower made erroneous decisions or suffered losses in the 1st month of the reporting quarter, the bank will be able to find out and document this only 3 months after the balance is submitted. Agree, 3 months is a long time for accumulating mistakes and making new ones.

2. Do not attract short-term loans to solve long-term problems, such as opening new retail space, construction, or purchasing fixed assets. The borrower’s logic is simple - the easiest money to obtain is circulating money, so I invest my turnover in expansion, and cover the deficit with short-term loans.

There are even more exotic options for financing long-term investments. If the borrower cannot obtain an investment loan, including due to financial indicators, then he takes out short-term loans and will refinance them according to the term.

In my memory, both schemes led to technical defaults and borrower requests for extension due to a mismatch in the financial cycle, project payback and loan repayment terms. The second path more obviously ends in default and a liquidity crisis in the enterprise.

3. The borrower must have its own full set of financial mechanisms to solve internal problems. Budgeting helps you control and plan your income and expenses. But this is not enough. Internal policy documents required direct action on the maximum amount of defects, illiquid assets, re-grading with its attribution to the turnover of the enterprise. Accounts receivable must be clearly regulated by terms, types and amounts. The financial condition of debtors must be monitored. Often banks, when analyzing the borrower, lose sight of the risk of non-repayment of receivables, which only the borrower can realistically assess, including by involving the bank in the analysis of the debtor’s balance sheet.

EPILOGUE.

Poverty and Wealth - like two different sides the same coin. Poverty or lack of capital is the reason that pushes the entrepreneur to borrow to Wealth, and Wealth through the borrowing of capital and through the withdrawal of rent from circulation is the reason leading to his Dependence on loans. Is there a golden mean in this vicious circle? I think not. There is no choice. Only loans. Unless, of course, there is a tight pocket with oil and gas rubles or free government property. As a last resort, there are also Colombian or Afghan investment funds, as well as the Vladimir-Central Mutual Funds.

Business development always involves reinvesting earnings in order to increase the scale of the business and its turnover. Even if the goal is the subsequent sale of this business.

The game is always big. What if we're talking about about a growing market, or about an increase in market share, with a small or medium fixed own capital there is nothing to do at all. Therefore, the aphorism “you take someone else’s and for a short time, but you give away yours and forever” sounds very relevant in relation to our topic.

Losses caused by shortcomings and irregularities in the economic, financial or production activities of the enterprise.

Expenses during the operation of an enterprise are inevitable. However, there are those that are called efficient or productive. They are natural and justified. These are, for example, funds used to purchase materials for the manufacture of goods or to pay for electricity, without which the equipment simply will not turn on and will not work.

Unproductive expenses are those that could have been avoided. Such costs are wasted, and the enterprise’s task is to reduce them to a minimum. This will help reduce production costs - reductions in such expenses will be included in this indicator - and, accordingly, increase profits. Examples of non-productive costs are fines paid and losses due to defective products that cannot be sold.

At the same time, there are also unproductive expenses that must exist according to the law. This is, for example, paying sick leave to your employee or paying so-called “maternity benefits”.

Causes of unproductive expenses

The emergence of costs of this type is facilitated by the following:

• shortcomings in organizational activities;
• failures on the part of management, untimely adoption of key decisions;
• violation of accepted agreements;
• non-compliance with production discipline, irresponsibility of workers;
• deviations from the planned plan, allowing downtime;
• discrepancy between the professional development of employees and the level of modern progress;
• irrational housekeeping, wasteful waste of resources;
• payment for working hours that turned out to be unproductive;
• all possible technical failures;
• violation of storage conditions for goods.

Reduce overhead

To analyze the situation related to the volume of available expenses, specialists are needed. They study and process relevant information. The obtained data is used to predict the volume of unproductive expenses in the future. In addition, data analysis allows you to plan further activities and determine which reserves should be used to reduce costs. Company specialists must pay special attention to such factors as defects, production downtime, product damage and identification of shortages.

Marriage

Its appearance has a negative impact on the volume of products prepared for sale. In this case, the cost indicator increases, the profit decreases. In order for fewer defective goods to appear, it is necessary to keep strict records of them. This responsibility is assigned to the technical control department. The reasons for the appearance of unsuitable products for sale are determined. The perpetrators are identified and various sanctions are applied to them.

In some cases, the cause of defects is outdated equipment or the use of low-quality materials. Then measures are taken to correct the situation: the equipment is replaced with more modern ones, and another base is selected for the purchase of materials.

Downtime

It is also necessary to get rid of them in order to reduce the share of unproductive expenses. Downtime reduces profit margins, causing damage to the company. They arise, for example, due to a stop in production due to equipment breakdown. To reduce downtime, it is necessary to carefully monitor the condition of technical equipment and keep track of working hours.

Product damage and shortages

Storage of goods must be carried out according to the rules. Unscheduled inspections are carried out to find out whether they are being followed. When selling products, specialists must correctly prepare all documents and carefully carry out financial transactions in order to prevent shortages.

A responsible attitude towards unproductive expenses will allow you to keep their volume to a minimum and receive more income in the future.

Chaadaev V.K. 1, Chaadaeva V.V. 2

1 ORCID: 0000-0001-7484-5848, Doctor economic sciences, CJSC "Resource Investment Company", 2 ORCID: 0000-0002-5525-9795, Postgraduate student, Samara State Economic University

DEVELOPMENT OF A STRATEGY FOR REDUCING LOSSES AND UNACCOUNTED WATER CONSUMPTIONS

Annotation

The article discusses the issues of optimizing the investment plans of water utilities for modernization, energy saving and increasing energy efficiency while guaranteeing the provision of high-quality water to consumers. drinking water at an affordable price due to the use of modern information technology. The basis for solving these problems is to determine the real structure of unaccounted expenses and water losses and create a system of operational monitoring at enterprises providing water supply services.

Key words: strategy, water utility, reduction, losses, energy saving, information technology.

Chaadaev V.K. 1, Chaadaeva V.V. 2

1 ORCID: 0000-0001-7484-5848, PhD in Economics, Resursinvest, 2 ORCID: 0000-0002-5525-9795, Postgraduate student, Samara state economic university

DEVELOPMENT OF STRATEGY OF LOSSES AND UNACCOUNTED WATER EXPENSES REDUCTION

Abstract

Within the paper problems of optimization of water supplying enterprises investment plans are considered. The paper presents the way of investment plans (concerning the aspects of modernization, energy savings and energy efficiency improvement) optimization using modern information technologies in condition of compulsory providing consumers with high-quality drinking water for reasonable prices. The basis of the solution of the specified tasks is determination of real structure of unaccounted expenses and water losses and creation of an on-line monitoring system at water supplying enterprises.

Keywords: strategies, water utility, water resources, reduction, losses, energy saving, information technology.

Issues of increasing the efficiency of water supply systems (both technical and financial-economic) are among the main ones in the activities of any water supply companies in market economies. One of the most common parameters by which the efficiency of water supply systems is assessed is the amount of unaccounted water consumption.

As a rule, this indicator reflects the difference between the volume of water supplied to the network and the volume of water supplied to the consumer and presented for payment. The amount of unaccounted water consumption depends primarily on the condition of the pipelines and on the accuracy of measuring the volume of its consumption.

The result of large amounts of unaccounted losses is an increase in direct operating costs (consumption of electricity and reagents), deterioration in the financial and economic performance of organizations (illegal and excess consumption), overloading of facilities and the emergence of artificial water shortages, that is, a direct deterioration in the quality of services provided. In addition, the negative impact on engineering and construction sites due to flooding and soil erosion is increasing, and the load on wastewater treatment plants, not compensated by an adequate increase in payments. Thus, unaccounted expenses and water losses lead to direct commercial losses for the water supply company.

In the context of crisis phenomena and the reform of public utilities, the lack of budget subsidies, as well as the population’s transition to full payment for the cost of water supply services, continuing to ignore the issues of the efficiency of public utility infrastructure systems and the fight against unaccounted expenses cannot be justified either from an economic or social point of view .

In this regard, the development and further practical implementation of a strategy to reduce losses and unaccounted water consumption is very relevant for a water supply company.

Reducing losses and unaccounted for water consumption should be the goal of any water utility, as this leads to increased economic and environmental efficiency of the company, as well as improved quality of service for consumers.

The basis for starting work to reduce water losses should be a system analysis and assessment of the following indicators:

1. Operating Cost Efficiency – With less workload, utility management requires fewer repairs and prevents compensation payments.
2. Efficiency of capital investments - improving the quality of water supply will extend the life of all components of the water supply system and reduce fixed costs in the long term.
3. Accuracy of measurement and charges - reducing water losses leads to a decrease in the growth rate of tariffs for end consumers, while the revenue side should not change with the correct approach to the issue of consumption metering.
4. Compliance with and improvement of water supply safety and security standards – a well-maintained water supply system with few breaks or leaks ensures a stable water supply.
5. Reducing the amount of damage to third-party infrastructure structures and objects - due to leaks, underground voids are formed, which can lead to road faults and building collapses.
6. Reducing the load on treatment facilities - water from leaks entering drains creates additional load on sewer collectors.
7. Customer satisfaction - in addition to poor water quality, insufficient supply and health risks, leaks lead to a decrease in pressure in the water supply system, a change in the situation further motivates consumers to pay for services on time.

The basis for developing a strategy for reducing losses and unaccounted for water consumption is the results of a study of the current situation at a particular enterprise, the state of the regulatory legal framework for the industry, and the availability of modern technological and information solutions in the field of water supply enterprise management.

The goal of the strategy is to optimize investment plans for modernization, energy saving and increasing the energy efficiency of the enterprise through the use of modern information technologies.

The development of a strategy for reducing losses and unaccounted for water consumption should solve the following tasks:

• development and implementation of information technologies to create a system for comprehensive operational monitoring of unaccounted-for costs and water losses;
• reduction of unaccounted expenses, water conservation and improvement of the quality of water supply services;
• determination of the structure of unaccounted-for costs and losses of water, development of a model for operational monitoring and methods for determining unaccounted-for costs and losses of water;
• development methodological recommendations to reduce unaccounted costs and water losses.

Solving these problems will reduce the annual amount of commercial water losses to an economically feasible level.

To reduce water losses, water supply enterprises must move to a new level of analysis and ongoing monitoring of the condition of the water supply network. For this purpose, modern information systems can be used, the purpose of which is:

• receiving detailed information on the distribution of water flows in water supply networks;
• continuous monitoring of network operation;
• localization of emergency network sections;
• monitoring of water consumption in the residential sector;
• prompt detection of leaks.

The use of modern information technologies ensures:

• an up-to-date database of consumers of water utility services and the volumes of water consumed for each of them;
• a systematic approach to organizing modernization and reconstruction projects, capital construction and operation of water utility infrastructure;
• long-term planning and forecasting.

In the practical implementation of the strategy for reducing losses and unaccounted for water consumption, the following tasks must be solved:

1. Introduction of automated technologies for accounting and water supply management, ensuring:

• operational calculation and long-term planning of network resources;
• optimizing the modernization of water supply infrastructure;
• optimization of the service life of active equipment.

1. Optimization of network infrastructure operation:

• inventory and accounting of network infrastructure objects and systems;
• transition from the planned recovery method to the control and corrective method of operating the network infrastructure;
• flexible organizational structure enterprises.

1. Accounting and customer service:

• equipping with metering devices equipped with an automated information-measuring system for commercial accounting of energy resources (AIIS KUE);
• introduction of innovative tariff setting methods (tariff lines);
• client-oriented approach to working with consumers.

The initial step in controlling losses and unaccounted for water consumption is to draw up a real balance of water production and consumption, with special attention needing to be paid to assessing the actual volumes of water intake, production and supply to the network, since the existing practice of official reporting indicates the presence of distortions in the reporting indicators production activities.

Therefore, the main task of the strategy is to determine the real level of unaccounted expenses and water losses and calculate economic efficiency carrying out work to reduce them.

Literature

1. Lerner A.D. Unaccounted expenses in public water supply and sanitation systems // Water supply and sanitary engineering. 2005. No. 4. P. 9-12.
2. Khramenkov S.V. Time to control the water. M.: Moscow textbooks and Cartolithography, 2012. – 279 p.
3. Chaadaev V.K. Features of business process reengineering as a method of making changes // Bulletin of Chelyabinsk State University. 2007. No. 10. P. 149-156.
4. Chaadaeva V.V. Principles of functioning of the communal sector of the economy as a complex system object // Economics and Entrepreneurship. 2015. No. 6-3 (59-3). pp. 190-193.

References

1. Lerner A.D. Neuchtennye rashody v sistemah kommunal’nogo vodosnabzhenija i vodootvedenija // Vodosnabzhenie i sanitarnaja tehnika. No. 4. S. 9-12.
2. Hramenkov S.V. Vremja upravljat’ vodoj. M.: Moskovskie uchebniki i Kartolitografija, 2012. – 279 s.
3. Chaadaev V.K. Osobennosti reinzhiniringa biznes-processov kak methoda provedenija izmenenij // Vestnik Cheljabinskogo gosudarstvennogo universiteta. No. 10. S. 149-156.
4. Chaadaeva V.V. Principy funkcionirovanija kommunal’nogo sektora jekonomiki kak slozhnogo sistemnogo ob#ekta // Jekonomika i predprinimatel’stvo. 2015. No. 6-3 (59-3). S. 190-193.