Taking a Year End Inventory

CU Succeed Image© Copyright 2010 CorbisCorporation

Over the next month many of our counterparts in the manufacturing or retail industries will be conducting that painful year-end inventory.  This got me to thinking (dangerous as it may be) if it is such a tedious process why do they do it and is there an equivalent in the financial services industry? 

The answer to the first part of the question seems to be they primarily perform it to validate the information they will be providing in their annual financial statements. However, in the process of counting and confirming what they believe they are in possession of they may uncover some critical truths about their operations.  Some basic questions that would be worth asking might be:

  • What items just aren’t selling at the rate desired?
  • Where do we have significant waste that is the product of our processes?
  • Do we have suppliers and vendors that are not delivering on their contractual promises?
  • Where do we have substantial discrepancies between what we believe the state of our business to be and hard cold reality?

These are all important questions that merit further consideration by financial institutions as well.  While the balance sheet and income statement may be valid places to start the “inventory” process there are some real short-comings if we look no further. Let’s look at each of the questions above as it might be applied to a credit union:© Copyright 2010 CorbisCorporation

  • Product sales may be reflected on the balance sheet, yet are these numbers potentially more indicative of the economic and/or interest rate environment? For example, wouldn’t you expect mortgage loan balances to grow significantly in a rate environment where borrowers can qualify for larger loans? Do we look at the number of actual products (accounts) or services added to see if we’ve been able to make more sales, more efficiently in lieu of potentially being deceived by results that weren’t largely a product of our efforts?
  • What’s checking account churn look like at your institution? How many accounts do you have to open just to stay on the level? Given the discomfort associated with opening a new account and setting up all of the ancillary yet necessary services (debit card, bill pay, mobile access) why would anyone want to switch? Yet far too often there is something we’re doing to cause customers to bolt. Isn’t that a significant waste of an opportunity to create retention initiatives and build deeper relationships?
  • As a consultant who works primarily with mid-sized credit unions most of my clients are heavily dependent  (dead in the water without) upon the services of critical 3rd party providers and vendors.  Where is our institutions reputation suffering as a result of “strategic partners” who haven’t delivered as promised? Is this the year we actually decide do something about it?
  • What are the critical business objectives, goals or measures that we (yet again) failed to reach this year? Be honest enough with yourself to strip away the external excuses and think about what you will really need to change internally in order to meet or exceed those goals in 2014.

© Copyright 2011 CorbisCorporation

It’s time to get real folks. Being nice, having mobile apps and offering competitive rates (like there’s a margin to be had) just isn’t going to cut it anymore.  We have to be disciplined enough to stay focused on the limited number of strategic differentiators our unique client base values, execute upon them flawlessly and not allow ourselves to be deceived by outside influences that are beyond our control.

I guess I now see why the inventory process is so painful.  One final thought – do the inventory now, allowing you time to enjoy the holiday season. Then make it your New Year’s resolution to change the outcome in 2014. As always, if you need assistance I’m just a call or a click away.


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