Can a company become the fastest growing and most profitable organization by making timely payments to vendors?
Read this amazing story to understand and copy interesting concepts in your own respective industry.
This is the amazing story of Balrampur Chini Mills (BCM), India’s largest integrated sugar manufacturing company.
BCM is India’s most valuable sugar company by 100% over its nearest rival. The company reported a cash profit of 609 crores in 2019-20 (the next highest was 327 crore). It reported a profit after tax (PAT) of 509 crores in 2019-20. No agro company in India has attempted a share buyback. Balrampur has completed four in the last four years.
They used a simple trick. Make farmers more productive by paying them on time. A simple formula ‘Pay in 14 days.’ Pay farmers quicker, strengthen their cash flows, enhance their profitability — and get them to plant more cane. This process helped in increasing sugar production substantially by getting more cane from farmers.
Meenakshi Saraogi, the owner of this company & pioneer of the sugar industry, introduced this formula and made this company highly successful.
So what is the learning and can we emulate it? Yes of course.
In the construction industry, often contractor & vendor payments are delayed. Most of the time payments are delayed due to inefficiency built into the system. E.g. contractor bills are not validated or submitted on time, bills are lost, etc. Just by ensuring timely payment to contractors and vendors on time or sometime earlier than the payment period contractors can be encouraged to improve productivity. This will also help in retaining a contractor to work with the organization for a very long time.
Read this article to know more. From The Economic Times: https://epaper.timesgroup.com/Olive/ODN/TheEconomicTimes/shared/ShowArticle.aspx?doc=ETM%2F2020%2F12%2F12&entity=Ar00800&sk=19516D48&mode=text