Posts Tagged ‘management’

6 Tough Love Cash Management Tips

July 10, 2010

by Doug Smith, President, The Woodhaven Group

Ok, so your business cash flow is in real trouble.

The expected sales increase you anticipated after changing the marketing strategy is not working. I mean it is really not working.

As a small business owner it seems like you are a quarterback operating the 2 minute offense just to get some cash in the door.

What can you do differently to bring in cash?

Well I have walked in your shoes.  It’s not a pretty situation to be in.  Here are tips you can start doing before the sun goes down tonight:

  1. Let everyone know there will be nothing purchased in the company without it first going on a purchase order.  Then you have to personally sign off on the purchase order before it is processed.  If that delays a purchase 24 hours so be it.  Then you as owner sign every check.  Do not delegate this.  By signing checks you will discover who has circumvented the new system.  You will find that unnecessary spending and over spending will stop when everyone knows there will be an audience with you.
  2. Have your management team identify such things as old equipment, old machinery, vehicles not being used, obsolete inventory, and even unused furniture.  Then sell it.  Have a board posted in your office with the items listed and post the money received as each item is sold.
  3. Eliminate all service and maintenance contracts and replace with an hourly fee for service performed.  If your company really needs to cut back temporarily on expenses to generate cash this will do it.  You can always reinstate the service contracts later.
  4. Generate an upfront down payment  on all sales (unless you are a retail store where you get the full amount at the point of sale).  The sales department will balk at this as they will be concerned that a down payment will kill the sale.  It won’t.  Change the commission structure to pay less if  no down payment is received.  The top sales people won’t miss a beat.  They will get the down payment and be an example for the others.
  5. Go to your landlord and negotiate a 10% or more reduction on rent.  In  return offer to extend the term of the lease.  Make sure there is a clause in your lease that allows you to sublet unused space.  
  6. If you own your property or own large equipment then do a sale and leaseback.  Even if you owe on loans, you will convert your equity position into cash.

As an owner of a small business, sleeping at night is a good thing.  Use these 6 tips and take some pressure off of your cash flow position and your nerves.

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Consult This Advisory Board To Improve Business Cash Flow

July 6, 2010

by Doug Smith, President, The Woodhaven Group

It can be lonely as the owner of a growing small to medium sized business.  Often a problem or opportunity may come up and as an owner you wished there was someone to bounce ideas off of that really understands your business.

Owners never have enough trusted advisors to turn to that really know what they are talking about and will shoot straight with them.

Oh yes, there are bankers, attorneys, and accountants and most of them mean well but have not run a business and had to meet cash flow deadlines.  The extent of their knowledge of your business and industry is what you have shown them. 

Here is who I have used over the years as an informal advisory board when I needed a second opinion or felt like I needed a fresh idea:  the CEO or National Sales Manager of my top supplier.

If your #1 supplier has done business with you for years then they probably know your company as well as you do.  They may know your industry even better than you.  You need to tap into that knowledge.

Make no mistake, top management at your #1 supplier has a vested interest in you doing well and your company growing it’s marketshare.  They want to help.  They want your business to be successful.

Unlike an attorney or banker, your supplier is in a unique position to observe and understand the trends taking place in your industry.  After all, the CEO and National Sales Manager are meeting with owners like you everyday across the country.  They know the difference between the superstar managers and the B-team.  They see changes happening in real-time. The existence of their own company depends upon the everyday business decisions being made by their clients. They cannot afford for those decisions to be wrong.

I have often used input from these individuals in my decision-making.  A few of the benefits I have gotten from my best suppliers have been:

  • A unique successful promotion I implemented that had worked for another company in a non-competing market in the country.  I did not have to resort to trial and error advertising.
  • Identified which benefits of the supplier’s product got the best results when featured in advertising spots.
  • Personal introduction to owners in other parts of the country similar to my company.  I then successfully developed a mutually beneficial relationship that has lasted over the years.
  • Suggestions for reputable suppliers in other product lines that other owners had used that did not compete with his company.
  • Cost savings ideas he had seen work in other companies that ended up increasing my business cash flow.
  • Marketing channels that were working or not working and why. 

Developing a close relationship with the CEO and top management of your supplier can also work in reverse.  You may find your opinion carrying more  weight when your supplier gets ready to redesign or upgrade the product you purchase.

The next time you have a problem that seems unsolvable, pickup the phone and run it by your #1 supplier.

It can be a win-win situation for both companies.

Will Telecommuting Increase Business Cash Flow ?

June 24, 2010

by Doug Smith, President, The Woodhaven Group

It seems like business owners and CEOs wake up everyday trying to find a new way to increase business cash flow, productivity and sales.

A tool being used more frequently these days to achieve those goals is telecommuting. 

Telecommuting is the process of an employee working somewhere other than at the office.  Usually this means the employee is working from home.  The increased utilization of the Internet has allowed this alternative workplace to become much more popular.  For many businesses it has turned out to be a win-win situation for both the employer and employee.  The telecommuting employee is typically referred to as a teleworker.

Is it something your company should be doing?

Most researchers and business consultants will advise you that it is the right thing for your company to do.

My answer to that question is that yes, teleworkers are going to become a larger percent of the workforce in the future and your company needs to include them as a part of your employee mix.  However, for the program to be successful, your management team must do their homework first or the concept could fail.  There are benefits and concerns that must be addressed.  Here are just a few of them:

Benefits:

  1. Improved Productivity:  There are university, corporate and government studies that show the teleworker operating out of their home is a more productive employee than the employee in the office.  Reasons often given are fewer interruptions, less stress, and a fresher employee ready to work due to not needing to deal with the issues of commuting  to the office. This may be true but, frankly, I am not sure how much more productive the employee working from home really is. There are distractions at home also.  Laureen Miles Brunelli had interesting comments on this subject in a 2009 blog post on About.com  You can read Laureen’s blog post here.
  2. Less Office  Space Needed:  This can be a real cash flow savings for the company.  Less space needs to be leased, no utility or phone cost, and office and workstations can be eliminated.  Those are all real measurable savings.
  3. Flex Time For the Employee:  A real benefit for the teleworker is the opportunity to utilize flextime in their day.  The day can be broken up allowing the teleworker to take time to address home and family issues and still get the job done.
  4. Can Reach High Quality Candidates:  I have seen individuals with advanced degrees who, due to family commitments, have to stay at home.  Yet they still want to realize their professional ambitions.  If they were required to come to an office this high quality candidate would be lost to the company.
  5. Can Utilize More Part Time Employees:  Depending upon the scope of work, the teleworker may not need to be a full-time employee.  For instance, two 20 hour part-time data entry workers might be the best solution for both the company and the stay at home employee.
  6. Opportunity To Employ Handicapped and Retired Workers:  There are some excellent handicapped workers and retirees who choose not to work in an office environment.  They become a real asset to the company working out of their home office.
  7. Improved Morale:  Studies have shown that teleworkers have  higher morale  than those in the office environment resulting in less turnover.  Not having to commute to and from work would be a morale booster by itself to many workers.
  8. Bad Weather Is a Nonissue:  No problem with snowstorms.  While the regular office may be closed for the day, the telecommuting employee carries on as if nothing happened.
  9. Geographic Location Is Not a Problem:  Working remotely allows the company to hire the best candidate regardless of where they reside.  I once hired a telecommuting employee from 600 miles away because she was the best candidate available.  Also, if the spouse is relocated to another city, your company’s teleworker can follow the spouse and continue on as if no move occurred.  

Concerns:

  1. Lack of Social Interaction:  This might be the biggest concern.  The teleworker operating from home does not participate in the “water cooler” conversations or have the opportunity to have a lively discussion at break time with others about the ball game on TV last night.  There must be a process in place to engage the work at home employee if they are the type that requires a lot of social interaction.  A behavioral analyses of the telecommuting candidate might be a good idea to use during the hiring process.
  2. Can the Worker Stay Focused:  Is the  teleworker self disciplined, organized and have the ability to manage their day?  If not, the productivity issue becomes a concern not a benefit.
  3. Is There Buyin From the Manager:  A work at home employee has to be managed differently than the one down the hall from the manager.  Goal setting with specific measurable results and deadlines is critical.  Managing to results is the way to make the teleworker accountable.
  4. Could There Be a Culture Problem:  Not all jobs are a good fit for the telecommuting program.  If there are employees in the office that perceive the teleworker as a slacker that does not pull their weight, then the productivity concern might shift to those employed in the office.
  5. Promotion May Not Be An Option:  If the employee wants to move quickly up in the organization, then working from home may not give them the opportunity to develop and show off their people management skills.  A manager career path training program might necessitate the employee only being in an office environment.
  6. Security Can Be a Problem:  If the teleworker has access to the company database and confidential documents, it is imperative that steps are in place to protect these valuable assets of the company.  A disgruntled employee working remotely can do serious damage.
  7. Are There Savings In Office Equipment:  If the company reimburses the teleworker for a computer, fax, printer and other office needs then how much savings were actually realized?  In some companies the teleworker uses their own home computer with no reimbursement.
  8. Overtime Can Be An Issue:  A happy productive at home employee can easily surpass 40 hours per week.  While managing to results is good, the company still must be in compliance with all labor laws.  This includes not only overtime but also making sure workmens compensation is paid. 

Incorporating telecommuting into your employee strategy can be a real source of additional business cash flow.

It is just important to do your due diligence to assure yourself that the program will be the success that you expect it to be.

I Quit. Oh No! That Was My Top Customer!

June 23, 2010

by Doug Smith, President, The Woodhaven Group

One of the great “moments of truth” in the history of a business comes when a long time loyal customer quits and decides to take their business to the competition.

It can be like a family member dying.

When this happens, the sales, profit, and business cash flow of the company can take a major hit.

It can and should be a shock to everyone in the company.  I hope it never happens to you.  However, if it does there are 2 basic questions that must be answered immediately:

  1. Why did the customer leave?
  2. How do we get the customer back?

Here are 5 thoughts and questions I have on addressing why a long time customer left:

  1. First, the owner or CEO should personally be the one to analyze what happened.  It is not acceptable to lose an important customer or client and the responsibility falls primarily on the shoulders of the person at the top of the organization.  As a leader, you cannot be in the business of losing your top customers.
  2. If this customer found a reason to leave then it should be assumed that your company might be on the verge of losing other customers due to something you are doing or not doing.  This customer is like the canary in the mine.
  3. The owner or CEO should visit the other owner or CEO and have a heart to heart talk.  Find out exactly what the problem was that caused this decision and ask where the breakdown was occurring.  Chances are it was not one reason only.  Often there was an ongoing issue that was communicated repeatedly to the company, and in the opinion of your client, the issue was ignored or not taken seriously.
  4. Initiate immediately a listening campaign with your other large customers. It should be assumed that if the competitor persuaded one important customer to change then they will leverage that decision to go after your other top accounts.  A senior manager needs to visit your customer’s top management and find out if there are any problems brewing.
  5. The management team should meet back at headquarters and compare notes from all the conversations.  Are there common threads that require an action plan be put in place?  Some issues that may be identified are:
  • Has the processes in place to do business with your company become too complicated?  Has it just become too difficult to do business with your company?  For example, think of a customer service problem where the customer has to speak to numerous people and no decision is made.  Is your company lacking one point of contact for a customer to go to that would simplify the process or has your company become loaded with territorial silos.
  • Are your employees just going through the motions?  Are they taking customers for granted?  Is there a morale problem that impacts the relationship with all customers?  If so, why is there a morale issue?
  • Is there a growing quality problem?  Do finished products have mistakes and have to be remade?  Are shipments not delivered completely?  Are deadlines not met?
  • Do you have competitors now offering the same product or service as your core product and selling it at a lower price?  Has the competitor re-engineered your product to deliver more benefits?  Even a #1 product in the marketplace has to keep evolving to stay ahead of the competition.  

There may be other problems but it is my guess that one or  more of the above will be the cause of your business divorce. 

So, how do you get the customer back?

The reality of the situation is that you may not be able to.  Chances are the other company struggled for a long  time to arrive at this decision and will probably stick with it.

Regardless, here is what I would do:

  • Chances are the problem stemmed from a series of people issues.  I would put in place one point of contact and that person would only be the owner or CEO.  No one else.  If this is the real problem, then this solution will communicate how seriously the owner considers the situation.  
  • Schedule weekly meetings chaired by the CEO to review the status of the account with your lost customer’s management team.
  • Revisit with the customer’s CEO or owner the reasons why they chose to do business with your company to begin with.  Psychologically this allows the customer to resell themselves on what they liked about your company.  It also shifts the conversation from a negative to a positive one.
  • Identify the #1 feature that the customer likes and consider offering it at no  charge or reduced cost for a period of time.  Possibly throw in extended terms.  If you think it is too costly to do this ask yourself the cost of acquiring the new customers needed to replace the volume of this one top revenue generator.
  • If the customer is still reluctant to change back, ask if your company could take a reduced position in serving them instead of losing 100% of the business.  There is a good chance this strategy will work.   

One benefit coming out of this is that the CEO of your company will get a clearer picture of what is working and not working in the company.  That is a positive thing.

The best way to prevent this loss from happening again is to be proactive by making sure your management team is taking the following 4 actions:

  1. Listening to your customers
  2. Managing with timely accurate metrics to find where the company is falling down
  3. Keeping your employees motivated and focused on the customer and not themselves
  4. Making sure your value proposition and core products are in tune with the wants and needs of your target customer as well as the marketplace. 

In my opinion, losing a top customer is a leadership issue.  Sales, cash flow, profit and net worth will suffer.

Don’t let it happen to you.

Reduce Surprises With A Rolling 3 Month Cash Flow Projection

May 25, 2010

By Doug Smith, President, The Woodhaven Group

“Cash is more important than your mother.”  A west coast business professor once said that and as a former CEO I agree.  Just for the record my mother would agree with me.

With all the volatility occurring in the economy it is very difficult for any business to plan ahead.  We see turmoil in Europe that may reduce exports, a consumer only beginning to spend again, and private and public debt at uncomfortable levels to say the least.

What is an owner, CEO or senior manager to do in an environment like this?

First, I would remind you that your company runs on cash.  If you run out of cash you either have to replace it or go out of business.  Therefore, it is best to anticipate any peaks or short falls in your near term cash position so you do not find yourself making crisis management decisions when, for instance, it is time to make payroll.

The best tool to use is a rolling 3 month cash flow projection that lists your anticipated inflows and outflows of cash.  In otherwards, where is your cash coming from, where is it going and how much do you have left over?

In my opinion, this should be a monthly cash flow projection that is updated weekly.  If cash is extremely tight and unpredictable then a rolling weekly cash flow forecast is even better.

Meet weekly to update the projections with key management team members.  A side benefit will be a clearer understanding by everyone where the most productive use of cash is occurring.  I found this to be a positive energizing exercise for my management teams.

What to do if you see a shortfall in cash coming?  Here are a few options:

  1. Have a line of credit in place with your bank and use it as needed.  That is what it is there for.  Your banker should receive updates of your cash flow so he can anticipate the request and payback.  He will be impressed how you are managing your cash situation.  He will probably wish his other clients were doing similar calculations.
  2. Speed up payment of accounts receivable.  There always seems to be late payers and being aggressive in collecting may be all the added cash you need.
  3. Get extended terms from your key suppliers.  Rather than just delay paying, I have found it best to ask them for a temporary extension on terms.  If you have been a good customer and paid as agreed this should not be a problem.
  4. If you are a manufacturer one solution may be simply to return old inventory to your supplier and get a credit.  Apply the credit and it may actually offset a portion of the next invoice due.
  5. Cut expenses.  No doubt in the weekly management meetings,  areas will be identified where expenses can be reduced without hurting revenue. As CEO or owner you may have to make the final decision when and where to cut in order to get the action that needs to be taken.   

A rolling cash flow projection is one of the best management tools there is.

Be proactive.  Anticipate your short-term needs and you should not have any cash flow surprises.

Use A Baseline Measurement To Track Change In Performance

May 14, 2010

by Doug Smith, President, The Woodhaven Group

Here is a simple tip from the field of medicine that will increase your productivity, cash flow and overall profit performance.

I  cannot believe how often management in any type of business I see fails to do this.

And that is to start with a baseline measurement when making a change.

The best at using baseline measurements is the medical community.  The Doctor, nurse, or hospital always starts by getting your beginning weight, cholesterol reading, red blood cell count, blood pressure, temperature or some other measurement to help them track the rate of progress, or lack thereof.

As management, we need to do the same in order to assure ourselves that cash invested is getting the results we want.  If you are going to invest additional dollars in some new program or project you want to know that you will get an expected payback within an acceptable period of time.

You can have all the metrics, measurements, and progress points you want but it is imperative that you start with an accurate beginning baseline measurement from which you can track the expected improvement.

Think about that the next time you initiate a new energy savings program, search engine optimization strategy, increase in media spend, bonus program or any of the many tweaks and adjustments you make every month in your business.

Did you have a starting point to measure against?

If it works for your blood pressure it may also be a remedy for your business.

Am I Making Money? What Happened To My Cash?

April 30, 2010

by Doug Smith, President, The Woodhaven Group

Those are the 2 most basic questions every business owner, CEO, or senior manager should be asking.

Things move fast in today’s business world.  The economy, government, competitors and consumer groups are constantly challenging our way of doing business.

We have a plan in place and doing our best to grow our company everyday.  Is it working the way we want?  There are daily KPIs and dashboards in place to help us.  To me there is only one true analytical measurement and that is the monthly financial statement. Yes, I said monthly.  This is a place not to skimp on spending.  Quarterly or year-end reports are way too late.  Also, I suggest using a CPA.  If you cannot afford one full-time then use a reputable one on a part-time basis.

Monthly financial statements should be 2 things:

  • Accurate:  you do not have the management time to go back and correct bad numbers.  Besides, credibility is damaged when outsiders (think lenders) see you revising  results.  It’s a red flag that there may be bigger problems.
  • Timely:  you want to take actions to correct problems.  Getting a late financial statement means you lost another 30 days to improve.  I want to see financials no later than the 10th of the following month.

Still not convinced you need monthly financials?  Here are 11 important reasons you do need them:

  1. Are you getting the results you planned to get?  If so, then good. If not, then you want to know why, where and by how much you are missing your budget.  Was your original budget even accurate?
  2. It helps hold a manager accountable.  The management team deserves to know what areas are performing and not performing. Each of the managers needs to know how they personally are doing.
  3. There is always an area of the company that needs fixed.  This will help to clearly identify what it is and if progress is being made.  If there are multiple problems then the numbers will help you prioritize what to attack.
  4. If you have borrowed money then your lenders will expect financials.  If there are Board of Directors or advisors they will want to see the direction of the company.  Remember, there may be outside audiences wanting to see your financial results.
  5. The obvious will hit you between the eyes—– good or bad.
  6. Is there a 2-3 month trend occurring?  It could be in overall sales, profit or gross margin.  You also may find a clear trend in an important line item that is costing you profit and cash.  An example might be sales dropping while marketing and accounts receivable are increasing. 
  7. Is a branch location or product line not performing?  Without the ability to measure results you may waste valuable cash and management time  trying to grow the wrong part of your business.
  8. If you operate a seasonal business you need to know your off-season financial performance as well as whether the company executed as planned during your best months.  Example:  retail at Christmas, landscaping during the spring/summer.
  9. It can help your tax accountant by showing him/her whether you are making a profit during the year and at year-end.
  10. It helps you manage and plan cash flow needs based upon what is actually happening.  Do your cash flow budgets need to change going forward.
  11. If you are in an industry that blindly shares financial information, it lets you compare how you are doing against the top performers. 

Daily and weekly KPIs are critical to the success of a business but the monthly financial statement is the final scorecard that tells you if the sum of all your actions gave you the results you wanted.  You may discover the KPIs were wrong.

You must know what is happening with your cash and if  the business is profitable.

A timely and accurate financial statement will do that for you.

Put Your Employees On The Cash Flow Team

April 26, 2010

by Doug Smith, President, The Woodhaven Group

Employees look to management for guidance or direction on what to focus on, what is important, what direction the company is going…… simply, what is your priority.

If the employee sees that the owner passionately believes in the concept of generating more cash flow then do not be surprised if you start seeing good results throughout the organization.  Employees will find ways to internally generate cash that you have not even thought of.

There are many ways to reinforce this mindset.  Here are just two:

  • As CEO or owner personally have a column in the company newsletter dedicated only to cash flow successes.  Show examples in the last month of additional money freed up as a result of actions by employees or new systems implemented.
  • Post in the employee break room or lounge a certain metric or dashboard related to cash flow that shows positive progress such as reduction in days outstanding of accounts receivable, increase in sales, or an uptick in inventory turnover.  Any of these metrics can have a column of their own in the newsletter.

The employee will take great personal pride in being knowledgeable about what is important to the success of the company.

Make sure the employees are the MVP of your cash flow team!  Do it by making sure you as management have open ongoing communication on this most important part of your business success.