I’m using the term Tightwad for dramatic effect and because stashing cash instead of spending it can make you feel that way after 20 some years of a spend economy. But guess who is making hay right now?
American business has become notorious for operating with little or no cash reserves and using credit cards to fill the gaps. Its no surprise that 70% of new businesses will suffer or fail due to lack of cash when its needed the most. So this IS A HUGE ISSUE. As a result – we commonly ignore it!
With all the daily cash demands and surprises, its hard to stay ahead of the game much less build a war chest. Not true! All you need to do are two things: 1.) Use the BASIC approach with thinking time to create cash, and 2.) faithfully follow a few simple guidelines.
Cash Rewards Motivate Participation : Make it a Game where Everyone Wins Employees are only irritated by Tightwad tactics when they suffer but get no more cash in their bank. You can change the whole game with one thing – include them in the rewards. That is a great example of what I call a “pivot point” which is the one thing you can change that makes everything else fall into place.
Make “creating cash” a game with real cash winnings based on a percentage of new cash created. Like Vegas, the house is always the big winner! Set up your version so there is a percentage that goes into a company-wide pool and another percentage that goes to the persons who participated in a specific gain. That way everyone gets a check, all the way down to the part-timer; everyone is equal, some are just more equal than others.
Make a point that a large percentage of cash created will go into the “war chest” so the company (and employees) can grow and have reserves for the unexpected. Job growth and job security are often more motivating than cash in hand with no security.
If I get enough requests, I’ll share some of the great “creating cash” games that work so you can build one to fit your specific goals.
Question Expenses the RIGHT Way - The typical question is, “Do you need this?” WRONG QUESTION – if they didn’t think they needed it, they wouldn’t be asking for it. Take personalities and opinion out of the thinking and insert ROI. ROI is short for Return On Investment or “Payback”. The question should be, “Whats our payback in dollars and percent? How long does it take to get the benefit? Show me the comparables!” You should also ask yourself these questions before signing a check. If there are no good and accurate answers, tell them to come back when they have the facts.
This puts the focus on creating cash by putting your cash into things that will make more cash and/or reduce operating costs. If you have a preferred vendor whose pricing is out of line, you will have the facts and can confidently call them to negotiate. Price comparisons at the item level saves a bunch of cash, since every competitive vendor has price leaders.
Keep track of the cash created by using ROI with every transaction. A simple list will do, a spreadsheet is better, etc. (The bookkeeper will be glad to do this!) But track it, every day and post the savings weekly so employees “get it” that they will get a piece of the cash created. Keep it simple.
Measure the Cash Created – Beyond tracking cash created by cutting expenses, you need to measure net cash generated from suggestions, changes and new projects. It’s all a part of the incentive pool and war chest.
To make the process fairly effortless see “Cut Accounting Costs & Gain Accuracy” and have your system set-up for projects or classes (so you can easily identify cash creating efforts). With a good set-up, capturing the gains is easy plus you can get up to date reports on any cash creating effort with one click.
For the gaming aspect of this tactic to work, all the players have to feel that the counting is reasonably accurate. You can have open disclosure of cash creating projects and still keep the financial “books” private. That means participating employees can argue the project details, which discloses mistakes without you having to look for them. You keep your financial privacy and they validate the details of their projects with gusto. Very efficient and easy to sustain. Future articles will deal with how this can be easily structured and effortless to sustain.
Save Half the Cash you create using the Basic Approach – Take half the created cash for each month and put into a separate account as a War Chest. Use the other half in daily business and the employee pool, plus a little incentive for yourself. I’m not talking about normal profits, just the new cash generated with the “game”. It adds up fast.
Use Strategy / Tactics / Logistics BEFORE you invest cash into any project or growth – If you don’t understand, see the article, “Strategy, Tactics & Logistics = Winning”. The benefits are:
- The investment will further your goals, create even more cash and save time in reaching your objective.
- You won’t go down a dead-end path.
- It prevents spending it just because you have it.
Being a happy Tightwad is a great for you and your employees.