News Flash ! Your employees control your company’s cash flow! Yes, each and every employee in your company has either a positive or negative influence every single day on your company’s cash flow. They either kill your cash or make it flow.
We’re not talking about an employee’s use of time or payroll hours here. We’re talking about daily, monthly and annual multi-million dollars worth of hard cold cash. Here’s how:
Inventory Control – Whether you are in a wholesale or retail operation, inventory management is critical to cash flow. Too much inventory equals lots of idle cash bringing in absolutely no return as well as interest expense if you need to finance that investment. Too little inventory and you lose customers. Simple concept, right?
So then, who controls inventory levels at your company? Who decides what products to carry and when products get ordered? Typically, it’s our employees who make these decisions every day. They are the ones who control our inventory cash.
How can employees unknowingly kill cash? How about salespersons who, in the name of good customer service (or quicker commissions), put pressure on warehouse managers to stock up? Or worse, do you have a warehouse manager who thinks his days go much smoother if the warehouse is stocked to the rafters with every possible product?
Both of these employees are cash flow killers, even though they think they are doing their job correctly. You may think they are two of your best, most loyal employees, but they come with a large cash flow price.
Marketing – Each and every employee can be either your company’s best promoter or worst nightmare. What your employees say to their family and friends about your company on their off-hours can have a tremendous impact on company sales.
Consider the c-store clerk who tells her friends she never buys anything at your store because the prices are so high! Now, contrast that experience with a clerk who tells all her friends about her store’s fancy new ice cream bar or espresso maker. The first clerk is a cash flow killer, while the second clerk is a cash flow creator.
Customer Payment Terms and Expectations – If you are in the wholesale business, accounts receivable management can make or break your cash flow. If you think employees are not involved in how quickly or slowly you get paid, think again.
First, who sets the customer’s terms? Are 15-day terms ever given when you should and could have given seven or ten days? How do your sales and customer service people feel about EFT terms? Are they promoting EFT terms with new and existing customers?
How are customer payment expectations set? Your sales, customer service reps and drivers all talk to customers, making comments that will directly influence the customer’s payment behavior. When your customer mentions they might be late with a payment, do your employees say, “That’s okay, hardly anyone pays their bill on time anyway?”
If you have a collections person, consider how that person treats your customers. A collection person’s demeanor can either encourage a customer to pay more quickly in the future, or make them not want to do business with you at all.
Often in companies with a collections person or department, other employees wash their hands of collection effort because of the “it’s not my job” mentality. For instance, imagine a customer trying to hand a payment check to a driver and the driver refusing the check, telling the customer to just mail it in! It happens more frequently than we would care to acknowledge.
Care of Company Equipment – Employees who create cash flow are the ones who treat company equipment as if it’s their own. That means they take complete self-responsibility for all company equipment they come in contact with on the job. Their careful handling and preventative maintenance save the company unnecessary repairs.
Cash flow killers are employees who could care less about company equipment. Their total lack of respect for company property is evidenced by lack of cleanliness, lack of preventive maintenance and subsequent cleaning and repair bills.
Us Versus Them Attitude – Unfortunately, some employees are raised in homes where the predominant feeling is us (the workers) versus them (big business). Despite the fact that yours may be a family operation, all they see are your big daily sales, that you are part of the oil business, and that you are much better off than they are. This attitude encourages them to help themselves to company owned goods and property, figuring your big business will never know what’s missing. Again, this employee is a cash flow killer.
Use of Company Supplies – Even an employee who would never dream of outright stealing might think nothing of going regularly to the supply cabinet for new supplies rather than using up or making due with what they have on hand. In c-stores, this may be the clerk who does a great job cleaning, but takes the Windex off the shelf instead of walking all the way to the backroom to grab the bulk window cleaner.
Now you see that employees control your cash flow, so what can you do about it? Educate and reward. The most progressive companies educate each and every employee about business fundamentals, going beyond the profit statement to balance sheet and cash flow. From initial orientation to ongoing courses and monthly financial reviews, all employees need to know business concepts. Next, couple that education with an incentive program tied to cash flow, and you achieve powerful results. Cash flow responsibility should belong to the entire employee team.