Cash flow “Complacency”

Going back maybe twenty five years, there was a men’s hairdressing salon in the CBD of Brisbane. The owner was an Italian immigrant who had arrived in the country with nothing, and built his business from hard beginnings. This old gentleman, even when retired from actually cutting hair, would sit at the cash register watching the six or eight stylists cutting, and would take the money from the customers on the way out.

He rarely smiled or said anything. But he watched every penny go into and go out of that business, and he made sure the customers got a good haircut. His business grew and became wealthy.

Today, that one salon has grown to a chain of salons. Today, his son runs the operation. No one sits at the cash register anymore, and the son doesn’t work in the business day to day. But each day without fail, at the close of business, he still phones in to each salon to receive the figures on the takings, to record the number of clients and to monitor the productivity of each stylist.

There is one deeply indelible lesson in that story.

Even though the salons now do a massive turnover, the business is built on a culture of being aware of exactly where every cent comes from and goes to, every day.

A similar example also comes to mind. In my formative days as a copywriter, I worked in a direct mail agency run by a most astute Jewish gentleman. He ran a very tight ship. In fact, one of the things he did each morning, was to have his secretary collect all the discarded envelopes from the day’s incoming mail. She was instructed to cut them open, and clip them together with a bulldog clip. This was duly delivered to him as his ‘notepad’. His ‘lead by example’ message wasn’t lost on his staff. No one dared waste anything.

Now, this may not be the way you want to run your business! But being acutely aware of where your money is coming from and going is just good business sense. There’s a great tendency when times are good, and cash flow is healthy, not to keep such a tight control on the money. That doesn’t mean being miserly. It means having controls. So often, strong cash flows and profits breed complacency.

Money is spent too freely on new equipment without any rigorous cost/benefit analyses being done. Salaries tend to blow out because times are good (instead of rewards being tied to performance that can go down as well as up). It can engender a cavalier attitude, almost arrogance within the organisation. Everyone feels “bulletproof”.

And as a result, things get sloppy and people become wasteful.

One colleague once commented, “One quick look in the stationery cupboard of an organisation will tell me a lot about the way the company is run. If there are no stationery registers or controls over who takes what, if there is an oversupply of stationery and duplication of ordering, no seeking of competitive pricing, if the cupboard is untidy … then there’s a good chance the rest of the organisation is run the same way.”

This lack of attention to small details manifests itself in ‘cash flow complacency’ … a compacency towards receivables, an ad hoc approach to payables, overstocking of product, carrying of dead stock, leaving unclaimed stock with distributors …

If this in any way gives you an uneasy feeling that you should do some investigation into your systems, great!

Time to call in your accountant. If this situation has developed in your organisation, chances are, you’re personally NOT the person to fix it. That’s not a criticism. Just acknowledge that your strengths are most likely elsewhere, and you’re best leveraged doing what you do best. Get in someone who really understands how to tighten your ‘ship’.

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