Managing your business’ cash is not something you should think about every once in a while. You must manage it every single day because cash fuels your business. It’s your business’ lifeblood. On a daily basis you should check how much money your business took in, how much it spent, and the status of your receivables. If you don’t do all of these things, you risk being blindsided by a cash shortfall, which could cripple your business.
If you don’t have the time to manage your business’ cash day to day, give that responsibility to someone who has the skills to do it and who you can trust to do it well.
Many new businesses do not pay enough attention to cash management because they are overly focused on generating sales.
There are several aspects to effective cash management. For example:
- Use credit applications to figure out to whom you will extend credit and how much credit you will extend. Ask each of your customers to complete a credit application and then evaluate the information on each application using a credit scoring process.
- Make timely billing a priority. The quicker you bill, the faster you will get paid and the less likely that you will have a problem with cash. Although a lot of businesses invoice once a week, I recommend that you invoice every day.
- Understand how your customers handle their accounts payable and what you must do to ensure that they pay you as quickly as possible.
- Monitor your accounts receivables on a daily basis and do not let bad debt accumulate. Even one past due account can have a big impact on your business’ financial health.
- Use an electronic accounting system. If you don’t have one, get one!
- Manage your credit relationships with your carriers as aggressively as you manage your shipper relationships.
A client reached out to me about performance issues within his team and I want to share it with you.
He owns a freight brokerage business that employs 10 brokers. Overall, he has a good team and his business is growing, so they are on the right track. However, he has some employees who have spotty performance when it comes to sales and customer service. He feels these people could be successful so he wants to help them get their performance up rather than letting them go.
Does this sound familiar to you? Maybe you have experienced a similar situation with your team.
This is a very frustrating problem for managers. Since the performance is spotty, it implies that sometimes they get the desired results and other times they fall short. Since you are having some success, we can assume that your employees will be successful if they follow your process and make the appropriate effort.
At TranStrategy Partners, we recommend using the following 4 step approach to helping your employees meet your performance standards:
Set Expectations. Create clear expectations for what you expect in terms of results. Also, communicate the processes for getting those results. When you set expectations, it is important that your employee understands exactly what you mean. If possible, have them articulate the direction in their own words (active listening). Sometimes, things that seem simple and direct in our heads are far less clear to the listener – this is especially true if you are an expert and they are a newbie.
Job Specific Training. A properly developed training program is a great way to communicate the goal and the processes needed to reach the goal. Ideally, your training should improve your employee’s attitude, skills and knowledge. Developing the right attitude about the goal and the approach is key. The right mental attitude will motivate your employee to gain the skills and knowledge necessary to succeed. Skills training will allow your employee to learn the specific skills needed for the job, like phone skills, customer service skills, TMS skills etc. Knowledge training refers to broader learning and practical understanding of a topic like supply chain, truck sizes, or industry best practices.
Inspection. After you have communicated your expectations and provided training, the next step is inspection. People do not always do what you expect, but they usually do what you inspect. Follow up with your under-performing broker to ensure they are doing exactly what you asked them to do. After a while, they will realize you are inspecting their work, which will compel them to follow the process. Inspect their work until their performance improves then reduce to periodic inspections to prevent backsliding into old habits.
Recognition and Reviews. The last step in the process is recognition and reviews. Schedule a review with your underperforming broker and discuss their performance. If they are back on track, encourage their progress and if they are still failing, determine the cause and take action. If you see your employee following the process and getting results, give them a little casual praise like “good job” or “attaboy.” Be careful with praise and recognition – it should always align to performance. Too much or too little can send the wrong message.