Difficulties Conquered!

By Peggy

Guimaras, the island where we stay, is an island famous for Mango, so there is a market of mango as well as mango products here that is also very famous. As a mango lover, I’m so lucky to be allocated to a processed food company to help the owner with her business.

My business is one of the mango and cashew product manufacturers in San Miguel, called Merly’s Cashew Nuts and Delicacies. The owner, Merly, is a very kind old lady, showing warm welcome with big smile every time we go to her place. As a student who has never done any consulting work before, her smile and greetings are always the best to eliminate my nervousness and always give me great confidence. She always brings us some of her newly made products when we arrive at her factory while also asks us to stay for lunch. This also reminds me that when we asked Merly that what is her secret of being always out of stock due to hot sale, she said with a warm smile that maybe it’s because her way of introducing her products and greeting customers is different. Now I know her secret of hot sale—her hospitality to everyone who comes into her business! She just simply treats everyone of us as her family member.

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Merly always offer some delicious food to eat!

Located in owner Merly’s beautiful garden, Merly’s Cashew Nuts & Delicacies has around 10 products including delicious cashew nuts, mango piaya, mango scotch and so on. Four regular workers work from Monday to Friday, while sometimes when it’s mango season, Merly’s son and daughters also come to help. (Small local businesses like Merly’s are family businesses that are not separated as different entities, so family members are always working in the business without salaries) After our first meeting at the business, we figured out 2 of her major problems, which are lack of record, incomplete cost allocation.

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A worker is making Mango Piaya.

Also similar to other businesses in Guimaras, her business doesn’t have a systematic and complete record of sales or production. Neither does she has any record of cost of each product. Hence, she doesn’t have any idea about how much she earned, or lost in previous years, either from each product or from total sales. But, what’s great is that she herself has realized the importance of keeping record, which gives her enough incentives to apply what we have recommended for her, while also gives us enough motivations to help her as much as we can. Because it’s usually good for her to have a clear idea about which one is her best seller, or which one is the main source of revenue, so we recommend her to have a separate record for sale of each product, while we also tried to design a format that is simple enough for even her employees to record as she sometimes is too busy to record (she has to take care of both the business and her family matters).What’s good is that she is also able to design a similar format for production record by herself after we present a format of sales record. Actually, for a lot of time, it’s not that the business doesn’t want to keep records; it’s just that the owner doesn’t really know how to record because she never learnt something like that before. I’m very glad that we can apply what we have learnt to help them a little bit while we can also learn the differences between real business world and theories in books from her business.

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We calculated produce cost one by one together. 

However, the process of changing is never easy. In order to know from which product the business earns the most, we also need to know how much the business costs for the products. But after we checked for the business cost allocation method, we soon realized that the owner didn’t count the overhead cost into the product cost. So basically she actually earns less than what she thinks she can earn. However when we tried to calculate the overhead cost, the fact that most businesses are family-based businesses, which are not separated from families, really bothered us. They don’t have separate assets, liabilities or equity as businesses, so basically what the family owned is what the business owned, and vice versa. For example, when the business is out of money, the owner will just simply put some personal money into the business without recording or personally borrow from relatives. As a result, the business doesn’t have separate cost from the family as well, which takes us some time to figure out how much the business really costs. For our business, because it’s just located in owner’s garden, so it pays electricity or water bills together with the family while shares 2 chucks which are used for both products shipping and family matters. So it’s hard to know how much water or electricity the business really uses while also unable to really calculate how much the depreciation of cars is. But later we still tried to calculate the overhead cost through estimating a percentage of usage as it’s impossible to separate the business usage from family usage in the short run during our stay in Guimaras. So we calculated the cost for each product one by one together with Merly as the business didn’t really know the cost for all products even with the previous method. Although what we newly calculated is still not accurate enough, but at least we are closer to the real cost now while also teaching the business the importance of overhead cost.

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Merly has won a lot of prizes.

When Merly said, “Thank you! Now I know how to calculate it even only by myself!” at the end of last meeting, I know that all of our efforts and patients all have payoffs! Although I can only offer a little bit help compared to professional business, at least I know I can help the business, even just a little bit, and also I know that a little change can make big difference! Although the whole process is not very easy and smooth, but at the end, my partner and I, together with Merly, conquer all the difficulties we met! Sincerely wish Merly’s business can be better and have a larger success in the future!

 

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