Every business goes through its ups and downs and cash is particularly precious when things aren’t going so well. W hile it absolutely helps to have a financial professional nearby, there are certain steps you can take – they’re FREE – to get underneath the hood and diagnose some key issues that can make a big difference.
Here are 3 of the Most Powerful Tools I Have Used.
[pullquote]Never neglect details. When everyone’s mind is dulled or distracted the leader must be doubly vigilant. ~ Colin Powell[/pullquote]
It’s a phrase we’ve all heard ad nauseum, but yes, the devil’s still in the details.
So, how do you keep your perspective on the more strategic elements of your company while capturing and controlling sufficient details to calibrate and validate the execution of that strategy?
Here are a 3 powerful and proven methods to uncover and gain insight into some of these intricate details.
1. Sign all the checks.
There’s probably no better way to get a quick grasp of the myriad details flowing through a company than to sign all checks.
I do NOT mean a ritual or perfunctory signature.
I mean a thorough demand for and review of all of the documentation to support a payment – purchase order, delivery receipt, supply requisition – anything and everything that is available to support that purchase.
While this may be a tedious practice – and for larger companies, you may want a minimum check size before you see the check – it will reveal untold intricacies about the currents that flow through your business.
What Will I Find?
Using this practice, one CEO recently discovered that the company had nine dedicated fax lines, a common practice maybe 10 years ago when faxes were ubiquitous. Today? He eliminated all but one, saving over $5,000 per year with that simple discovery.
Another CEO was surprised to learn that uniform expenses were increasing while employment was declining. Upon investigation, he found a well-intentioned but casual approach to uniform requirements. Repairs were never made; those that were damaged were just thrown away.
The company’s commitment to cleanliness also led to an early discard of uniforms that simple repairs and spot cleaning could fix. Clarifying the policy and encouraging the same attentiveness to the uniform that employees pay to their own clothing achieved an annual savings of more than $15,000.
2. Review a Detailed Aging of Accounts Receivable
Even 40 years ago, most billing and accounts receivable (A/R) systems routinely produced an aging. As you probably know, the A/R Aging is a report that breaks down the A/R owed to your company by whether the A/R are current or past due.
It usually takes a very simple form, but get the Detailed Aging that includes every customer by name. The typical Summary Aging is only an aggregate of A/R balances owed by aging category. It’s primary value is to help you focus on the categories, shown below, that might help you sharpen your focus on the areas that require the most attention.
- 1–30 Days Old
- 30–60 Days Old
- 61–90 Days Old
- 90+ Days Old
Get the Detailed Aging by Customer
All too often — particularly when things are going well — companies fail to rigorously focus on getting their customers to pay on time.
In every case I know, CEOs and senior leaders have been flabbergasted by how much money is sitting in older, unpaid invoices for which there has not been a systematic collection process to make sure the Company is paid on a timely basis.
If you’re looking to uncover much needed cash, you’ll usually find a bunch of it sitting here.
This old business adage, Management By Walking Around, still works.
It means getting out of your office regularly to just walk around.
It’s not a deliberate dash to a colleague’s office or saying hello to someone on your way to lunch. It means a deliberate “walkabout,” with no particular agenda, to talk with employees about whatever is on your mind – or theirs.
- Is the warehouse running smoothly or is there a lot of duplicate work and unnecessary movement?
- Are people accomplishing productive work or are they consumed with busy work?
- Does paperwork flow accurately and reach its intended destination on time?
- Are the policies, procedures and workflows part of a coherent plan or are they old systems owned by no one without regard to their effectiveness?
Everyone knows something you don’t.
While we may have toiled in the trenches for many years before arriving at a leadership position, things are constantly changing.
Unless you’re spending 40+ hours/week performing certain tasks, it’s unlikely you know more than those who do. Even if they don’t understand the bigger picture that drives their job, they discover issues every day that affect productivity and effectiveness.
If you make a point to engage your employees in a penalty-free conversation where they’re encouraged to speak freely about what they know, you’ll be amazed at the subtle insights and workflow improvements that you’ll discover.
Try these THREE FREE Proven Strategies
- Sign all the checks.
- Review a Detailed Aging of Accounts Receivable
- Management by Walking Around
These three steps alone will uncover unsuspected flaws in your processes and policies and will identify both quick fixes as well as procedural changes that will reverberate throughout the organization.
Their only cost is a little time and dedication. Try it to find some unexpected treasures.
Question: What tips have you used to find hidden cash in your business? Why not join the conversation and share your thoughts and comments? You can add your message easily by clicking the link to our Facebook Page or @Exkalibur on Twitter. I visit them every day and look forward to discussing these ideas and concepts with you.