Agripoolers from the Netherlands cannot pay personal visits to cooperatives due to COVID-19. Jef Aarts therefore provided online advice to Shree Dumarwana Milk Producer Cooperative Limited (SDMPCL) in Nepal.
Aarts has been working for FrieslandCampina in various financial roles since 2006. Last June he visited two cooperatives in Nepal, including SDMPCL, on behalf of Agriterra. He developed a financial plan with them. “Both cooperatives supplied raw milk to large factories, but were involved in a transition which entailed trying to convert more milk into added-value products such as cheese and yoghurt, for example. My objective was to shape financial planning and strategy.”
Aarts focused on the basis in the first instance: what does profitability look like, how do you know what your profit margins are, etc. “In the space of a short week, I provided each of the cooperatives with advice on how they could achieve success with more commercially and operationally substantiated financial analyses.”
On completion of the consultancy assignment, he remained in touch with the Agriterra team in Nepal regarding the progress of both cooperatives and last month he was asked to provide SDMPCL with online advice. Due to the COVID-19 crisis, the cooperative encountered blockages in respect of deliveries and there were problems with payments from the factories they supplied.
Jef Aarts during his visit to the cooperative last year
Aarts touched base with the Agriterra Nepal team and various people from the cooperative, such as the general manager and financial manager, five times within the space of a month via Microsoft Teams. He consulted with them with the aid of translations. “They ended the financial year in June and the relevant figures were therefore available. This gives a good idea of the most up to date situation. Particularly in view of the crisis. This insight first had to be developed with them. An insight into profitability as well as incoming and outgoing cash flows. We then produced a financial plan. Their task was to prepare a plan for the coming three months and to see what improvements they could make. In a subsequent consultation, we compared the actual results of the first month with the plan that had been prepared and we discussed the effects of this on the coming months. The plan-do-check-act principle was put into practice as we went along. You prepare a plan, you set objectives, you execute, you examine the actual results and you adjust where necessary. For example, a tip I gave them was to split the results. For example, dividing financial profitability into client type or product group.”
There were limitations and payment problems due to COVID-19, but when Aarts reviewed the results for the first month, there was still a small profit. So fortunately, the impact was not too disastrous. But according to him, it is vitally important that the new factory is filled with production volume as quickly as possible. “The cooperative is certainly struggling, but not so much due to COVID. There is increased pressure due to the required growth. One needs sufficient markets for products that provide greater profit margins. The marketing aspect is therefore very important. More of a commercially-oriented mindset and a better financial strategy is required. And they need to set clear objectives which they communicate to different people. So as far as I’m concerned the potential certainly exists, but further steps are necessary.”
The new SDMPCL factory
Aarts looks back on the assignment with satisfaction. “There was a change in management following my advice last year and that was a setback. The people at the cooperative need to tackle the financial planning and strategy themselves. But in my opinion, they need to be supported in this. For example, knowledge of profit margin analyses based on cost price is lacking. That is why I think this online advice was a good thing. And soon they will receive assistance from someone local who will provide them with financial advice a few days a month. This continuity is certainly very important during this phase. I will touch base with them again myself at the end of November.”
“With the right approach, online support in the area of finance can be effective as part of wider ongoing support.”
Collaboration with Team Agriterra Nepal went perfectly according to Aarts. “My impression was that they were well versed on the situation with the cooperatives and we were on the same page in terms of our approach.” The plan is to schedule another online session during which he will provide the team with additional financial expertise so they are better prepared when they advise cooperatives.
Aarts says this assignment was easy to manage online. Particularly since he already had a prior history with the cooperative. But of course, nothing beats being there in person. “There were occasional connection problems during calls with the cooperative. In addition, you are dealing with another language and it is difficult to gauge from a distance whether cooperative employees understand everything or not. That is why it is better to be there in person, because you can then pick up on non-verbal communication too.”
Specific tips for online consultancy from Aarts: