Are your employees making great money decisions?

Money decisions are not limited to the accountants

Business owners and leaders often think accountants are responsible for all the money stuff.

Here’s the truth…the money was spent long before the paperwork made its way to the accountant. It is the accountant’s responsibility to process the paperwork and pay the bill, but the obligation to pay was made by others in the company. The accountant is simply helping the company meet the financial commitment in a timely, accurate manner.

Everyone in your business makes money decisions

Here are examples of the financial decisions that are not made by accountants:

  • Assistant ordered lunch for company meeting.
  • Office manager upgraded software and bought new computers.
  • Operations stocked up on materials and supplies.
  • Supervisor approved overtime to help the team meet a deadline and keep the customer happy.
  • Employee delivered extra service, but did not charge the customer.
  • Sales department gave discounts to close the deal and help meet sales goal.
  • Marketing manager signed a two-year contract.
  • Manager agreed to pay a hiring agency 25% of annual salary for a new hire.

It’s great you’ve delegated decisions, but have you equipped your employees to understand how they impact sales, profit and cash?

It’s not as simple as giving your employees a goal or budget and assuming everything else will magically fall into place.

Here’s a common example for the sales department. You gave them a monthly sales goal of $100,000.

Throughout the month, you celebrate as they meet their weekly goals. Before you know it, they met the monthly goal. You approve the sales bonus and celebrate at the next company meeting.

Later, the rest of the story comes out when your accountant closes the books. It turns out the sales department met the goal by giving huge discounts. The company sold more, but the sales were not profitable. There’s nothing to show for the extra work other than overtime and exhausted employees.

Did the sales team accomplish the goal?

No…the goal was not to sell $100,000 for the sake of selling more. You know the goal was to sell $100,000 with a 50% gross profit without adding a strain to operations or incurring overtime costs. But, did your team know everything you expected and how to increase sales in a profitable way?

The sales department needs to know the sales goal plus how to…

  • Generate profitable sales
  • Identify red flags in prospects before they turn into bad customers
  • Present the price and the value of the service
  • Close the sale without relying on discounts
  • Follow the company’s policies regarding discounts, payment terms and delivery dates
  • Understand the legal jargon in the proposal and which areas are negotiable
  • How the department’s decisions affect the company, other departments and customers

Here’s another example related to the marketing department. You give them a budget aka permission to spend $10,000 a month on new marketing campaigns.

The department invests the money by hiring an expert in digital marketing and signs a 2-year contract.

You start to notice the phone is ringing more. Sales are increasing. The new marketing campaign must be working!

Later, your accountant reveals the rest of the story. It turns out the increase in sales is primarily from existing customers thanks to a coupon that was mailed a few weeks ago. Not one sale can be traced to the new marketing campaign.

Did the marketing department accomplish the goal?

No…the goal was not to spend $10,000. You know the goal was to generate qualified leads and provide at least a 3-to-1 return on the investment. But, did you communicate your expectations and equip the marketing team for success?

The marketing department needs to know the budget plus

  • Definition of a qualified lead
  • Expectations for the marketing dollars including ROI
  • The company’s policy for signing legal contracts
  • How the department’s decisions affect the company, other departments and customers

Bottom line

Giving your employees a goal, budget or KPI is a great first step. Also, provide the context of how their goal fits into the big picture and set boundaries so they know when they need to request help. Follow up with training that teaches employees how their daily decisions affect finances, the customer experience and employee morale. It’s simple to start teaching your employees how to make better money decisions.

Profit is a team sport. It’s time to teach your employees the rules of the game.

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