How to tell if someone is ‘making’ you or ‘losing’ you money in your business?
Have you ever been sat with an employee and thought to yourself “I really think that they can do better. I know that they can do better”.
But you do not want to just say “Can you give us better return please? Can you make us more money?” It’s so difficult to ask for better performance without sounding awkward.
I am going to show you exactly what to do and say, in a meeting with your staff, in order to get better performance, a performance that ‘generates’ cash in your business. Without sounding awkward.
Cash performance matrix
The key to improving cash flow is setting cash performance criteria – what is acceptable cash performance of your business and what is unacceptable. The sooner you have this in your business, the faster you will generate more cash flow. Download one of the simplest cash performance templates below to set your cash performance criteria.
We fear confrontation
In a perfect world, all our employees would perform and make money for our business. We’d never have to ‘manage’ them and fear confrontation.
The reason we are afraid to ask our employees for a better performance, is down to our fear of confrontation. Or we’re afraid of offending the employee.
The most important thing to remember with your fear of confrontation is that:
- Your employee will probably not going to be offended and
- Even if you are offended, they are not going to leave.
My staff will not get it
There is a huge misconception that if we tell our employees about poor cash performance of the business, they will not get it. And that they will think your company is not secure place to work in.
The truth is that cash flow is a responsibility of all employees, not just the CEO. So if cash performance is poor, then that is because one or more employees are ‘losing’ you money in your business. And I do not mean ‘losing’ literally. I mean ‘losing’ in a sense of poor performance, from a cash flow perspective.
Making your staff aware of cash performance in the business and how their role contributes to this can only benefit both, your employee and your business. You cannot hold them responsible for something they are not aware of. They need to know how the decisions they make every day, ‘generates’ or ‘eats’ cash.
It cannot get easier than this……
Roll out your cash improvement intention across the business
You are really going to like this. You are really going to understand this. This is really simple!
When employees are shown the parameters for success, and the progress the company is making, they feel involved. They begin to see how their role fits within these parameters for success and the ‘bigger’ picture.
Your employees can make a quick visual assessment of the performance results – green means the company is producing cash and red means the cash performance is poor.
When you give each employee, one or two numbers, cash performance KPIs, and you make them responsible for these numbers, you set the expectations for their individual performance. Give them colours. Every time the numbers go into red, they are ‘losing’ you money in your business.
Let’s look at the key steps in this process:
1.Tell your staff about your intentions to improve cash flow in your business
Show your staff where you are and where you are trying to get to. The improvements in cash flow you intent to make, over, say, a 90 days period.
Clearly explain WHY you want to do that. The more genuine your intentions, the more support you will get form them.
2.Tell your staff what is expected
Show your staff the ideal cash flow profile for the business.
If you have not done this already, read The Ultimate Guide on setting your Ideal Cash Flow Profile for guidance on how to set your ideal cash flow profile, followed by Setting your Cash Performance Criteria to define what is acceptable cash performance for your business and what is unacceptable.
3.Give each employee a number or two to own
Make each person responsible for one or two KPIs for cash performance. Give people colours. Green means they are making money for the business and red means they are losing money.
Every person in your business needs to understand what they are doing to your company.
Every person making decisions in your business needs to understand in advance, how the change in their behavior impacts on cash and profit.
Psychologically, this is a great way to influence performance improvement – both individual’s performance and the company’s.
4.Focus employee’s attention on key KPIs
Sales – focus your sales team on sales and gross margin results. They are responsible for giving discounts to clients. They are also responsible for ensuring clients pay for the sale. After all, a sale is not a sale if it is not paid for!
Procurement – get your buying team to source products that would enhance your gross margins.
HR – together with Finance keep an eye on operating expenses
Finance – focus your finance team on when creditors are paid, monitoring operating expenses at the same time and working with your sales team on ensuring money from clients are received on time and in full.
Warehouse/Operations – your warehouse group should monitor the stock levels, and in the case of services companies, your operations should focus on reducing the project completion time, or Work in progress.
5.Promote collaborative working
Individual performance is important, but it is working together that will bring the real results, the real transformation.
Teamwork will help you turn around the business cash flow very quickly. Your company will experience rapid turnaround and move to a much more favourable cash position.
Cash needn’t be the responsibly of the CEO only.
Every person in your business needs to understand what they are doing to your company. Cash results need to be understood by your management team. Every person making decisions in your business needs to understand in advance, how the change in their behavior impacts on cash and profit.
And poor cash performance equals ‘losing’ money in your business. When a person’s cash KPI is in red, they need to make changes to move the KPI from red to green.
When you follow these processes, cash performance management becomes very easy. And your improvement efforts are likely to deliver great results, fast!