Tải bản đầy đủ (.pdf) (92 trang)

Ineffective salesforce in improving quality worker life joint stock company (iqwl jsc)

Bạn đang xem bản rút gọn của tài liệu. Xem và tải ngay bản đầy đủ của tài liệu tại đây (2.53 MB, 92 trang )

UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business

BUI QUANG HUY

INEFFECTIVE SALESFORCE IN
IMPROVING QUALITY WORKER
LIFE JOINT STOCK COMPANY
(IQWL JSC)

Ho Chi Minh City – Year 2021



UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business

BUI QUANG HUY

INEFFECTIVE SALESFORCE IN
IMPROVING QUALITY WORKER
LIFE JOINT STOCK COMPANY
(IQWL JSC)

SUPERVISOR: Dr. DOAN ANH TUAN
Ho Chi Minh City – Year 2021



TABLE OF CONTENTS
LIST OF ABBREVIATIONS .............................................................................................. 1
LIST OF FIGURES ............................................................................................................. 2
LIST OF TABLES ............................................................................................................... 3
ACKNOWLEDGEMENTS ................................................................................................. 1
EXECUTIVE SUMMARY .................................................................................................. 2
1. INTRODUCTION ............................................................................................................ 1
1.1 Company history .......................................................................................................... 1
1.2 Company vision mission ............................................................................................... 1
1.3 Products and services................................................................................................... 2

1.4 Target customers: ......................................................................................................... 3
1.5 Organization chart ....................................................................................................... 4
1.6 Competitor’s information ............................................................................................. 5
2. COMPANY CONTEXT .................................................................................................. 6
3. SYMPTPOMS .................................................................................................................. 6
3.1 Unachieved sales targets: ............................................................................................ 6
3.1.1 Definition of sales; sales target and its relationship .............................................. 6
3.1.2 Diagnosis and analysis .......................................................................................... 7
3.2 High pressure on cash inflow for running business ..................................................... 9
3.2.1 Definition of cash inflow from operating activities and its important .................. 9
3.2.2 Diagnosis and analysis ........................................................................................ 10
3.3 Increasing rapidly in proportion of expenditure compare to revenue ....................... 11

3.3.1 Business expenses ............................................................................................... 11
3.3.2 Diagnosis and analysis ........................................................................................ 12
4. PROBLEM ...................................................................................................................... 14
4.1 Potential problems ..................................................................................................... 14
4.1.1 Ineffectiveness & Inflexibility in forecasting financial budgeting ...................... 14
4.1.2 Unprofessional trained salesforce ....................................................................... 17
4.1.3 Instable of funding resources .............................................................................. 19
4.2 Validating problem ..................................................................................................... 22
4.2.1 Employee’s perspective....................................................................................... 22
4.2.2 Manager’s perspective......................................................................................... 23
4.2.3 Finance Manager’s perspective ........................................................................... 24
4.3 The importance of main problems .............................................................................. 26

5. CAUSE VALIDATION ................................................................................................. 27
5.1 Potential causes.......................................................................................................... 27
5.1.1 Lack of professional HR in the training department ........................................... 28


5.1.2 Budgetary constraints and lack of training opportunities .................................... 28
5.1.3 Poor tracking process of employee training knowledge acquisition ................... 29
5.1.4 Differences in professional qualifications and competence of trainers ............... 30
5.2 Cause validation ......................................................................................................... 30
6. ALTERNATIVE SOLUTION ...................................................................................... 33
6.1 Alternative Solution 1: Propose to setting up professional training team ................. 34
6.1.1 Exploration .......................................................................................................... 34

6.1.2 Advantages and disadvantages: ........................................................................... 35
6.1.3 Procedures: .......................................................................................................... 37
6.2 Alternative Solution 2: Out sources professional trainers for staff ........................... 39
6.2.1 Exploration: ......................................................................................................... 39
6.2.2 Advantages and disadvantages: ........................................................................... 40
6.2.3 Procedures: .......................................................................................................... 41
6.3 Alternative solution 3: Established post training evaluation system ......................... 42
6.3.1 Exploration: ......................................................................................................... 42
6.3.2 Advantages and disadvantages: ........................................................................... 45
6.3.3 Procedures: .......................................................................................................... 46
6.4 Alternative solution 4: Focus on training budgeting to create training opportunities48
6.4.1 Exploration: ......................................................................................................... 48

6.4.2 Procedure: ............................................................................................................ 48
6.5 Solution justification .................................................................................................. 50
7. ACTION PLAN .............................................................................................................. 51
8. REFERENCES: .............................................................................................................. 58
9. APPENDIX ..................................................................................................................... 61
9.1 Financial statement report of IQWL from 2017 - 2020 ............................................. 61
9.1.1 Balance Sheet ...................................................................................................... 61
9.1.2 Statement of income for the year ended .............................................................. 63
9.1.3 Statement of cash flow for the year ended .......................................................... 64
9.2 Supporting information .............................................................................................. 66
9.2.1 Interviewee’ information ..................................................................................... 66
9.2.2 Discussion objective ............................................................................................ 66

9.2.3 Interview outline ................................................................................................. 66
9.2.4 Interview guide .................................................................................................... 67
9.2.5 Transcript summary............................................................................................. 68
9.2.6 Transcript for the group interview with the open – end question ....................... 79
9.2.7 Survey customer satisfaction (provide by IQWL JSC) ....................................... 80
9.2.8 Survey customer satisfaction answer (provide by IQWL JSC) ........................... 82


LIST OF ABBREVIATIONS
ACP
AP
APP

AR
BOD
BSC
CEO
CFO
COGS
FC
HR
IQWL JSC

Average collection period
Account payable

Average payment period
Account receivable
Board of Directors
Balance scorecard
Chief executive officer
Chief financial
Cost of goods sold
Financial controller
Human resources
Improving quality worker life joint stock company



LIST OF FIGURES
Figure 1: Map of quantity potential customers ............................................................... 4
Figure 2: Organization chart of IQWL JSC in 2019 ...................................................... 5
Figure 3: Comparison between actual sales and sales target ......................................... 7
Figure 4: Actual sales by region from 2017 – 2020 ......................................................... 8
Figure 5: Net cash flow from operating activities vs net revenue from 2017 - 2020 .. 10
Figure 6: Proportion between expenses and revenue from 2017 - 2020 ...................... 12
Figure 7: Proportion between expenses and revenue from 2017 – 2020 (Actual vs Plan)
............................................................................................................................................ 13
Figure 8: The statistic about highest and lowest in average salespeople in 2019 by
month ................................................................................................................................. 18
Figure 9: Initial cause and effect tree of IQWL ............................................................ 21

Figure 10: Main problem makes unable to achieve sales target at IQWL ................. 27
Figure 11: Updated cause – effect tree map makes unable to achieve sales target at IQWL ........ 28
Figure 12: Fish bone analysis diagram of unprofessional trained salesforce ............. 33
Figure 13: The connection between balance scorecard and performance measures . 44
Figure 14: Training budget flow (Referring from research(50)) ................................... 49


LIST OF TABLES
Table 1: Net cash flow from operating activities vs net revenue (2017 – 2020) .......... 10
Table 2: The variation of total revenue and expenses of IQWL from 2017 to 2020
compared to 2017 .............................................................................................................. 13
Table 3: Relationship between product share and profit margin in 2018; 2019 &2020

............................................................................................................................................ 25
Table 4: Evaluation of the degree of impact for each potential cause ......................... 31


ACKNOWLEDGEMENTS
The graduate thesis procedure is the most crucial period in the lives of every student.
A thesis is an essential assumption for us before we begin our job to develop research skills
and useful knowledge. For the completion of this thesis, I would like to express my sincere
thanks to:
The Board of Management of University of Economics Ho Chi Minh City (UEH)
especially UEH- Internal School of Business of creating favourable conditions in terms of
facilities with a modern library system, a variety of books and documents that are

convenient for searching and researching information.
Dr. Doan Anh Tuan had spent his valuable time reading the thesis and gave me
valuable comments and corrected my errors in the thesis draft as well as final thesis.
The management team and colleagues in Improving Quality Worker Life JSC for
creating favourable conditions for me to providing data, statistics, information, reports;
assisting me having practical contact, answering questions to helps me gain more
understanding, practical knowledge to finish the thesis.
My family, relatives, and colleagues for always being there, supporting, and
encouraging.
Due to the lack of talent experience as well as the limitations of knowledge, the thesis
will certainly inevitably have shortcomings. I look forward to receiving comments,
suggestions, and recommendations from the committee to improve the essay.

Finally, I would like to wish you good health, success, and happiness.


EXECUTIVE SUMMARY
"Not achieving sales targets" is considered a major concern for all most businesses,
in particular for service companies. By utilizing a wide range of current technology to
generate convenient services, services companies are continually modernizing, enhancing
customer utility as well as attracting more potential customers in order to push their sales
revenue. However, technology is just the enhancing factor, the quality of employees
especially salesforce remains fundamental to the performance of services ' s company
because salesforce is considered as the connection between clients and the company.
In reality, an unprofessional trained salesforce is the largest concern in IQWL JSC.

This prevents the new salespeople is unable to satisfy tasks requirement on time while the
experienced salesforce is stuck in attracting potential customers. The quality of service to
convince customers to purchase products will decrease which affect the sales revenue.
This research wants to give effective ideas for promoting the quality of salesforce in
order to help the core business activity of IQWL will be more grown from there. It is also
expected to reduce its company cost and boost IQWL's sales revenue. Furthermore, the
training policies will also be interested and enhanced for IQWL's employees.


1

1. INTRODUCTION

1.1 Company history
In 2007, in the beginning, Improve The Quality of Worker’s Life Joint Stock
Company (IQWL JSC) was established with the purpose to provide a pre-paid payment in
the form of an electronic mobile wallet. At that time, the mobile top-up agent network is a
nice niche business, but not large enough to be interesting. Therefore, the company owner
continues to search for "product and fit market", started to zoom into the idea of "credits"
being a powerful enabler and wherever "credit" payment is available, "credit" always wins.
The challenge to provide credits is to be able to quantify and estimate its "risk" counterpart.
Aha moment when the company owner asking the question "what if we can latch on the
payroll as a key enabler for providing credits to employees?". As a result, improving the
quality of worker’s life concept was born.
In 2013, after starting to create technology, product, market research, ... to validate

the improve the quality of worker’s life, IQWL JSC became a for-profit social organization
that offers workers in developing countries a ground-breaking job compensation package
at their place of employment. The program enables manufacturers, social organizations,
banks, and service providers to provide the lowest total cost of access to basic life-changing
products and services to workers at the bottom of the economic pyramid, who earn only
$100-500 per month. As a result, to close the affordability gap, IQWL offers a financial
alternative for the purchasing of goods and services with a 3 – 6 months’ interest-free
deferred payment plan.
1.2 Company vision mission
With the aim of improving the quality of life of workers and their families, therefore,
IQWL JSC has a vision is “a breakthrough employee benefits solution for low and mediumincome workers in developing countries, providing workers access to basic life-changing
products and services that improve quality of life for both themselves and their families and

contribute to their professional growth and productivity”. In order to fulfil this vision,
IQWL JSC explains the mission as follows:


2

“IQWL JSC aims to give employees immediate access to essential products and
services that will improve their quality of life and wellbeing and enable Comfortable,
Healthy, Smart and Prosperous Living both in the workplace and at home”.
With the mentioned mission and vision, IQWL not only providing employees and
their families more access to goods and services to make their lives more comfortable and
convenient, but it also creates value propositions that are great opportunities for

manufacturers and retailers. The value propositions include expanding and providing access
to an untapped market as well as increasing revenue, brand awareness, and identity for
brands & suppliers. And also for employers, IQWL improves the skills and competence of
their workers at work as well as decreases the turnover of employees.
1.3 Products and services
In order to accomplish its mission, IQWL has created a standard set of values for
workers and their families so that they have easy access to perfect lives such as comfortable,
healthy, smart, and prosperous.
- Comfort living (means life to enjoy) offers access to basic home appliances and
electronics products that can save time on housework, allowing workers to spend more time
with their families or to relax and enjoy life after hard working days. The products including
mobile phone, air conditioner, refrigerator, electric cooker, washing machine…

- Healthy living (means the greatest wealth is health) offers rewarding knowledge and
a wide range of high-quality healthcare products and services, expressly tailored to care for
the well-being and health of workers and their most valuable loved ones. For example:
prenatal vaccinations, cervical cancer shots…
- Smart living (means work smart, live smart) helps workers and their children access
essential educational products and services. Smart living offers program members a wide
range of high-quality options for educational facilities, physical classroom-style learning
curriculum, and online learning to enhance opportunities for worker’s self-development as
well as improving the quality of education for both children and them such as English
course for worker’s children.
- Prosperous living access to loan products, insurance, and long-term financial
planning products.



3

1.4 Target customers:
IQWL JSC is the pioneer in providing services and benefits for manufacturer workers
in Viet Nam. On the path of confidence and sustainable growth, IQWL JSC has built strong
operations with more than 350 companies in Vietnam and impact the lives of more than
50,000 workers and their families. IQWL JSC enables manufacturers, social organizations,
banks, and service providers to provide the lowest total cost of access to basic life-changing
products and services to workers at the bottom of the economic pyramid, who are the
official workforce who have to join social insurance and earn only $100-500 per month. As

a result, to close the affordability gap, IQWL offers a financial alternative for the purchasing
of goods and services with a 3 – 6 months’ interest-free deferred payment plan.
IQWL's customers are workers, but it does not mean that IQWL directly approaches
directly each worker. Instead, IQWL has cooperated with the Vietnam General
Confederation of Labour to deploy its service. The Vietnam General Confederation of
Labour will introduce IQWL to its member unions, where the member union will introduce
it to industrial parks for IQWL to contact the companies' labour unions. Due to the
introduction of the Vietnam General Confederation of Labour, it is not difficult to approach
companies, via labour unions. Since then, IQWL through the company's labour union to
approach workers, and IQWL will get a large amount of worker information from here. As
a result, it can be stated that the number of prospective consumers for IQWL is incredibly
huge and readily available. IQWL's mission is simply to lure them to utilize services and

products through salespersons.
Mrs Hong, Head of Sales department shared that:
“Our target customers are the official workforce who have to join social insurance.
According to statistics Ministry of Labor, War Invalids, & Social Affair, in 2019, Vietnam
has about 96 million people and approximately 56 million total workforces. The current
number of official workforce about 16 million, and adding 1 million new members [this
number is expanding more than 5% annually] each year, reaching about 20 million by
2025 (who has income from $100 - $500 per month). This official workforce is scattered
throughout the provinces and cities of Vietnam. As a result, besides headquarter in HCM
city, our company also has branches in the northern and central of Vietnam. These



4

branches along with headquartering will responsible for managing 7 regions which are Ha
Noi, Hai Phong, Da Nang, HCM City, Dong Nai, Binh Duong, and Mekong delta. These
regions have about 7,7mllion of workers and our company will focus on regions such as
the industrial park in HCM city, Dong Nai province, and Binh Duong province”.

Ha Noi 2.5m

Hai Phong 0.5m

Da Nang 0.5m


Mekong 0.5m

HCM City 2m
Binh Duong 1m
Dong Nai 0.7m

Figure 1: Map of quantity potential customers
(Source: IQWL internal report)
1.5 Organization chart
The organizational structure of IQWL JSC is quite clear, under the control of the
Board of Directors (BOD), Chief executive officer (CEO) plays a management role and be

responsible for whole company activities. There are seven functional departments in IQWL
JSC which are Finance, Human Resources, Product & Marketing, Sale, Support,


5

Information Technology, and Risk. In particular, in each department, the head of the
department will take responsibility for professional activities. Besides that, with the aim of
ensuring quality, ethical and long-term development, IQWL JSC also has different
committees such as audit, enterprise risk, nomination & remuneration, and products & sales
to support BOD as well as CEO. The following figure is a detailed organization chart for
IQWL JSC.


Figure 2: Organization chart of IQWL JSC in 2019
(Source: IQWL’s company structure)
1.6 Competitor’s information
There is no company that has built a comparable business model like IQWL JSC on
the market. However, in the current market, there are banks, consumer lending companies
such as Homecredit, FEcredit... that are now providing instalment packages associated with
commercial companies like Thegioididong, Dienmayxanh, FPTshop...for buying their
products. Hence, in a certain aspect, these banks and consumer lending companies are
considered IQWL’s competitors.



6

These consumer lending companies receive great support in capital from banks
because they are actually subsidiaries of banks. With this advantage, they can provide larger
financial support packages and having a longer instalment period than IQWL. However,
banks and consumer lending companies often contact workers directly while IQWL
cooperated with workers through the labour union of their companies. It means the labour
union will solve and ensure no disadvantages happened for their employees when any
problems occur. Therefore, from the worker’s view, IQWL is more reliable. Furthermore,
consumer lending companies just provide a loan for the worker to purchase products while
IQWL offers workers and their families more choices to access standard life with
Comfortable, Healthy, Smart, and Prosperous as mentioned above.

2. COMPANY CONTEXT
In discussion with Ms. Hong - Head of the sales, she mentioned that:
“The total number of workers who are participating in social insurance is about 20
million people and is gradually in recent years. With the operation of 7 regions spread
across Vietnam with abilities to contact 7.7 million workers who also is considered as the
potential customers of IQWL, the top management of the company expected that when
IQWL attract just about 1 -2% of this amount then IQWL not only to expand in terms of the
business market but also in terms of financing result such as revenue, profit.”
However, the truth that the company is facing is not the same as the expectations of
the top management. Based on interviews with Mr Hoang, CFO; Mrs Minh, financial
controller; Mrs Hong, Head of sale; Mrs Hanh, Head of HR, and employees at sale
department, as well as examining the secondary data from the organization’s internal

reports, the following three symptoms can be identified: negative profit, the gap between
collection period and payment period increasing and negative in cash flow from operating
activities.
3. SYMPTPOMS
3.1 Unachieved sales targets:
3.1.1 Definition of sales; sales target and its relationship


7

According to Tyler(1), the net income earned by selling products or services related to
the company's primary activities is referred to as sales revenue. In order words, sales

revenue is the money earned by a corporation from the sales of products or the offering of
services. The primary objective of any company, whether a small convenience store or a
publicly-traded multinational corporation, is to make money, so sales revenue is a tool to
measure the size of the business market share. The sales figure represents how much money
a company makes before any expenses are deducted. As a result, "top-line growth" indicates
that a company's gross profits or sales have risen and sale is just a measure of a company's
ability to generate revenue. Siragher(2) mentioned that there is a truth that success in any
company often begins with a strategy and a sales plan is an example. A sales plan is a
strategy that outlines the company's sales goals and tactics, as well as the steps the company
will take to achieve those goals. Most companies consider sales strategy to be a "working"
document that outlines sales objectives and the tactics used to accomplish them.
3.1.2 Diagnosis and analysis

Based on the primary data collection from the sales and financial & accounting
department, the picture of the business situation and especially the sales achievement of
IQWL gradually appeared. As seen in the graph below, the IQWL is having trouble in
making its achievement sales target.
1,158,293

1,200,000

90%
81%

992,004


VND million

1,000,000

80%

69%

72%

60%


70%
777,896

800,000
600,000

60%
715,948

50%
692,079

435,902
540,497

400,000

40%
30%

354,175

20%


200,000
10%
-

0%
2017

2018
Plan

Actual


2019

2020

Actual vs Plan (%)

Figure 3: Comparison between actual sales and sales target
(Source: IQWL internal report)


8


According to the above graph, the IQWL did not complete the sales target during the
4 years from 2017 to 2020 even though the sales plan was adjusted during that period. In
2017, the IQWL sale actually occupied 72% compares to the plan, the actual sale was
715,948 million VND while the plan was 992,004 million VND. While the company
adjusted the plan to make it closed to reality over the following three years, it nevertheless
still not achieved the plans as a set. Based on the figure above, it is obvious to see that, the
rate to complete the plan had increased from 60% to 69% and 81% in 2018, 2019, and 2020
respectively, despite this, the sale target as a whole was not fulfilled. In 2018, 2019, and
2020 the real’s sale was 692,079; 540,497; 354,175 million VND while targets were
1,158,293; 777,896; 435,902 million VND respectively.
700,000


616,893

632,406

600,000

VND million

497,235
500,000
400,000


307,381

300,000
200,000
100,000

67,730

42,603

31,325


-

30,835

17,070

2017

2018

South


12,427
2019

North

40,103
6,691

2020

Middle


Figure 4: Actual sales by region from 2017 – 2020
(Source: IQWL internal report)
For more detail, figure 4 depicts the information of actual sales by region at IQWL
from 2017 to 2020. It is obviously seen that that sales in the South account for the majority
of total sales, which is always greater than 86 percent (86 percent in 2017; 91 percent in
2018; 92 percent and 87 percent in 2019 and 2020 respectively). In general, sales in each
region are declining, similar to IQWL's total sales condition. Although sales in the Southern
region increased from 616,8 million to 632,4 million from 2017 to 2018, there is a dramatic
dip two years later, with sales falling to 497,2 million and 307,3 million in 2019 and 2020,


9


respectively. In the Northern, despite a fall from 67,7 million in 2017 to 30,8 million in
2019, Northern sales have increased marginally to 40,1 million in 2020. In contrast to the
preceding two regions, Middle sales have declined rapidly, from 31,3 million in 2017 to
6,6 million in 2020 (17 million in 2018 and 12,4 million in 2019 respectively).
These statistics indicate that the actual sales of a company have deteriorated as well
as not accomplished the plan. Not achieving sales targets may come from an unprofessional
salesforce. Without skills and knowledge, salesforce cannot spearhead IQWL's attack on
the market to approach and persuade customers to buy and use IQWL's products and
services. Therefore, salesforce activities are important and if IQWL's s management wants
to fulfill the sale target they need to manage and develop a high-professional trained
salesforce. It is a process that involves a lot of different jobs and becomes increasingly

complex. As a result, an unachieved sales target would be a symptom that must be
addressed to mitigate undesirable consequences for the company's success in the future.
3.2 High pressure on cash inflow for running business
3.2.1 Definition of cash inflow from operating activities and its important
Based on Fitzgerald(3), cash flow is described as the cash and cash equivalents that the
entities have at the end of a particular period of time. It was the result of the regarding of
cash inflows and cash outflows of a normal organization's operation. In other words, it
assesses a company's ability to handle its cash position, or how well it generates value for
its shareholders such as raising cash to pay debt commitments and covering operating
expenses. There are three major sections were classified and reflected cash flow activities
such as operating, investing, and financing activities(3). McBeth(4) believed through
operating cash flow, the health of the company's operation and core value business was

provided insight and clarity. To put it another way, it represents how much cash a business
earns from selling its goods or services. Hence, among the above cash flow activities,
operating cash flow is the most critical part the higher sales the more stable cash inflow
which can help the company have enough money to repay loans, reinvest in its operations
and cover its expenses without generating additional funds (investment activity) or
receiving lending money (financing activity) in order to continue operating.


10

3.2.2 Diagnosis and analysis
These numbers below were summarized as the net cash flow from operating activities

and net revenue of IQWL from 2017 to 2020. Through the summary, it is easy to realize
that from 2017 to 2020, IQWL 's cash flow from operating activities usually negatively
along with the decrease in net revenue of IQWL at the same period which means that IQWL
cannot be earned money by itself to running a business.
Table 1: Net cash flow from operating activities vs net revenue (2017 – 2020)

Net cash flows from operating activities
Net revenue

2017
(60,691)
715,948


2018
(27,404)
692,079

VND millions
2019
2020
(165,590) (174,960)
540,497
354,175


(Source: IQWL internal report)

700,000
715,948
600,000

692,079

VND million

500,000


540,497

400,000
300,000

354,175

200,000
100,000
(100,000)
(200,000)


2017
(60,691)

2018
(27,404)

2019

2020

(165,590)
Net cash flows from operating activities


(174,960)
Net revenue

Figure 5: Net cash flow from operating activities vs net revenue from 2017 - 2020
(Source: IQWL internal report)
As shown in the table and figure above, the IQWL suffers high pressure in cash for
operating the business itself. The net cash flow from operating activities is about negative
69,691 million VND in 2017. In 2018, although the situation had somewhat improved
compared to 2017, the net operating cash flow still was negative and was approximately
minus 27,404 million VND. It seems that the improvement in 2018 will serve as the basis
to revive 2019. However, the real situation was not like expected, the figure dropped down

significantly to a negative 165,590 and 174,960 million VND in 2019 and 2020


11

respectively. The company has negative cash flows from operations, implying that it was
unable to generate enough cash to contain its operating expenses such as labors cost, selling
expense, taxes, and so on., indicating a lack of working capital for operating. In the main,
it suggests that cash flow from operating activities at IQWL was not sufficiently
concentrated. The company either making too little sales which is one of the reasons cause
the IQWL JSC often experiences cash inflow deficiency. It is obvious to see that, during
the time of IQWL has to cash flow from operating activities from minus 27,404 million

VND drop down to minus 174,960 million VND from 2018 to 2020 was the result of the
decrease in significant sales from 715,948 million VND to 354,175 million VND. To put it
another way, due to the decrease in sales, IQWL may face with lack of working capital for
carrying business which can lead to high pressure on cash inflow for running a business.
3.3 Increasing rapidly in proportion of expenditure compare to revenue
3.3.1 Business expenses
Hansen and Kleiner(5) convinced that the cost of operations that a corporation incurs
in order to produce income is referred to as an expense. An item of expenditure is the money
expended, or expenses incurred, by a company in order to raise revenue. Accounts
expenses, in essence, reflect the cost of doing business; they are the sum of all activities
that, ideally, result in a profit in the future. To say understandably, costs incurred in the
usual course of business are known as business expenses. They will apply to both small and

large businesses. The income statement includes business expenses. To arrive at a
company's taxable net income, business expenses are subtracted from sales on the income
statement. Braymen(6) believed that profitability is the main priority of every company, as
well as the tools to evaluate business performance. Therefore, the company makes a profit
when its expenses do not exceed the revenue. In case the company cannot manage expenses
well, it will suffer losses which means when the business earns less than it spends during a
particular period. However, most businesses do not go out of business just because
temporarily their expenses are over their income. To sum up, business expenses need to
take into account carefully to make sure that it is not over or its proportion of the increase
is not too fast and much.



12

3.3.2 Diagnosis and analysis
The below figures presents proportion between expenses and revenue from 2017 2020 of IQWL as well as the comparison between the actual and plan.
150%

141%

126%

127%


2017

2018

2019

2020

Figure 6: Proportion between expenses and revenue from 2017 - 2020
(Source: IQWL internal report)
In general, because the IQWL suffers losses from the 2017 – 2020 period, the
proportion between expenses and revenue is quite high and usually more than 100%. In

2017, the proportion takes an average of 126%. The ratio of expenditures to revenue
increases slightly to 127% in 2018 before increase significantly to 141% and 150% in 2019
and 2020 respectively.
The company already planned the losses, hence IQWL anticipated the ratio between
expenses and revenue was around 110%. As the planning, the ratio quite stable which was
fluctuated from 107% to 112%. However, the actual happened not like estimating. The
actual proportion always is higher than planned.


13
150%
141%


126%

127%

112%
108%

107%

2017


2018

109%

2019
Actual

2020

Plan

Figure 7: Proportion between expenses and revenue from 2017 – 2020 (Actual vs

Plan)
(Source: IQWL internal report)
As the figure above, the gap between reality and plan has increased and has
particularly increased in recent years. In 2017, the ratio between expenses and revenue was
about 18% between reality and plan (the plan was 108% and reality was 126%). This gap
has sharply increased from 20% to 41% in 2018 and 2020 respectively.
Table 2: The variation of total revenue and expenses of IQWL from 2017 to 2020
compared to 2017

Total revenue
Total revenue compare to 2017 (%)
Total expenses

Total expenses compare to 2017 (%)

2017
726,495
100%
912,566
100%

2018
696,612
96%
882,877

97%

VND millions
2019
2020
551,762
370,865
76%
51%
778,919
555,771
85%

61%

The rapidly increasing ratio of cost to revenue shows that IQWL JSC is having
difficulties in cost management or that the growth rate of revenue cannot meet the growth
rate of costs. With this above information, IQWL is facing can be both, but it is possible
that the reason that the growth of sales does not meet the growth rate of costs is the main
factor. As the detailed information in table 2, in fact, if taking 2017 as a benchmark, the
total cost of IQWL will decrease from 97% in 2018 to 85% and 61% in 2019 and 2020


14


respectively, while total revenue decreased sharply and quickly from 96% in 2018 to 76%
and 51% in 2019 and 2020 respectively.
To sum up, after analyzing and evaluating among the three above symptoms that
IQWL is facing, it is clear to see that the unachieved sales target is completely considered
as the main symptoms that IQWL needs to focus on. Sales target was set up with the purpose
of allowing IQWL's management to monitor its success and determine if the company is
on track. Therefore, one of the best measures of how well IQWL JSC is doing is the number
of sales that IQWL generates. Missing sales targets not only obviously demonstrates that
the company does not have well performance but it also leads to some consequences effects.
For example, sales that do not reach the target can lead IQWL to have not enough income
to cover its expenses incurred which is also planned. Besides that, do not complete the sales
plan also leads to IQWL endure higher pressure on cash which means IQWL may not have

enough cash inflow to re-invest in business operations.
4. PROBLEM
4.1 Potential problems
With the purpose of figure out, what are the problems which conducting the
mentioned above symptoms such as negative profit, negative in cash flow from operating
activities, and increase in the gap between collection period and payment period? The
fundamental research method and undertaking the reality were used such as scrutinizing
and examining the internal department's reports, financial reports, and other documents. In
addition, with the intention of express the existed problems, in-depth interviews with the
key people were taken, along with applying the academic institution of former research.
The IQWL is currently encountering a number of problems that contribute to the above
phenomena.

4.1.1 Ineffectiveness & Inflexibility in forecasting financial budgeting
Based on the data analysis above, the ineffectiveness & Inflexibility in forecasting
financial budgeting is concerned with increasing rapidly in the proportion of expenditure
compare to revenue. Fitzgerald(7) realised that budgeting is the process of planning how a


15

business can spend its own capital. The term "budget" refers to a spending plan. Making a
spending strategy allows a business to know ahead of time whether it'll have enough money
to do what it needs or wants. Furthermore, Cassar and Gibson(8) supposed that budgets serve
as a management tool to ensure that the organization's objectives and strategy are met on a

timely basis. Variations in budget and actual results must also be investigated and tracked,
with appropriate disciplinary measures implemented for future time frames. Furthermore,
forecasting takes into account shifting market dynamics, strategic plans, error corrections,
and updated expectations in the initial accepted budget.
Based on the present method of operation, Mr. Hoang CFO said that:
“At the beginning of a new year, based on the actual result performance of last year,
the BOD will have annual meeting and outline directions as well as operational goals for
the next year. These goals are often based on an investor's expectations. After pointing out,
these goals will then be transformed into targets for implementation by the managers.”
Furthermore, Steffan(9) stated that financial planning must be a cohesive mechanism
that covers all strategic aspects of the enterprise. In the financial planning process, a lack
of cross-departmental collaboration has a significant effect on the financial information

used to drive decision-making. Loew(10) thought that leading organizations are said to have
both a top-down and bottom-up approach to planning. Senior management has initial
direction and a top-down vision of strategic priorities. Then, from the ground up,
department heads formulate a method for meeting certain targets. For the top-down and
bottom-up methods to meet, this method would also necessitate regular iterations.
According to the IQWL's current operation, there is a lack of bottom-up forecast
activities. This is due to the fact that centralized control, also known as decisions by
supervisors, is mostly practiced centrally, and performers are not completely aware of their
contributions to the process. To be more precise, the forecasting mechanism has not yet
been adequately developed because top managements continue to keep and make decisions
without employees' roles. Furthermore, at IQWL, forecasting is currently focused mostly
on historical evidence and updates from related teams, which can be seen as one of the

operation's weaknesses.


16

As stated by Mr. Hai – Regional sale manager of HCM regional:
“Like other regional managers, I have received the operating budget for the region
that I manage. The budget includes all operating expenditures such as renting an office,
logistics, and other relevant. However, it is really difficult for me to control these expenses
cause some reasons. For example, the most difficult to control relates to logistics cost
because this cost depends on the oil price, the weight of goods, and distance from the
warehouse to workers’ houses. Therefore, a fixed budget allocated from headquarter really

make me difficult for me balance the cash flow follow the approved budget.”
Mrs. Minh – financial controller also emphasized that:
“The tasks related to preparing and managing the budget were not given adequate
consideration, resulting in unforeseen costs. As a result, it had an impact on the company's
budget and efficiency. Head office directly planning, allocates, and manages costs for each
area. The regional manager is not responsible for the costs or profits of the Region.
Therefore, the spending regional manager depends on the Head office approved budget,
also not interested in ensuring regional profits. To be more precise, a shortage of bottomup activities was not used to plan and execute budgets, whilst the department was still
troubled by top-down activities. After getting the budget, I will input these statistics in the
system when there are any expenditures that need to pay the related department/manager
will upload these relevant documents for me to check. If there is an over budget, the system
will warn me, and I will ask them back person who requested payment about the reasons

for the excess budget. If their explanation is clear and reasonable, then I will inform to
CFO. After getting confirmation from CFO, I will approve these expenses.”
In actual reality, there is no formal framework budgeting for IQWL because the
present way of working is to achieve objectives and attempt and agree with targets when it
was assumed to start from the bottom-up to top-down activities. It's clear that IQWL hasn't
utilized the budget and takes action accordingly when the cost incurred unexpectedly. As a
result, an aggressive target budget was generated which was unable to offer an accurate
forecast, implying that costs had exceeded expectations. It had a major influence on
operating expenses, which resulted in a lower profit margin.



×