Is your cashflow flowing?

Is your cashflow flowing?

‘Trouble is that my cash doesn’t so much flow as tinkle…’

Cashflow is a common problem, and not just among small businesses. Complaints about slow payment are frequent – so what can you do to encourage your clients to pay on time, and in full?

Well, you could begin by thinking of this as an issue with your business process rather than an issue with your clients…

Why your process could stop you getting paid…

Have you ever reviewed your accounting process?

When asked, it’s amazing how many people say ‘no’. And yet it’s one of the first things you should do if cashflow is important to you. (And if it isn’t, you probably don’t need to be in business!)

Taking it step by step:

  • When – and how – do you send an invoice?
  • What is your process for checking it has been sent – and received?
  • How can you be sure that the right person is receiving that invoice – i.e. someone who has the authority and ability to pay it?
  • How do you ensure that they fully understand what they are paying for?
  • How do you ensure that they know how to pay – and where they should send their payment?
  • How do you ensure that they understand your terms of payment?
  • What is your process for recording payments made?
  • How and when do you send payment reminders?
  • Do you send overdue notices? How and when?
  • How – and how quickly – do you respond when clients fail to pay?

I am constantly amazed at how many businesses have nothing in place for one or more of these critical steps. So amazed, in fact, that I’ve produced a beginner’s guide to avoiding payment.

It shows you exactly what not to do – and you can see it here…

But the invoice, of course, is just part of the process. You need to consider the whole process – in detail.

Ready for change…?

Ready for change…?

Is someone who struggles with change ‘resistant’ to it? Or are they simply not ready for change?

The difference is important, because ‘readiness for change’ is something you can gauge even before a change takes place.

By knowing how ready for change they are – and working to increase their readiness – you may never need to deal with ‘resistance’ at all.

Using the word ‘readiness’ also removes the rather judgemental associations of the word ‘resistance’. That will affect the attitudes and approach of the people who need to make change happen.

So – how can you determine someone’s readiness? (And let’s give the ‘someone’ a name – Hubert – to avoid complicated language. Apologies to anyone called Hubert, of course…)

There are two issues you need to think about:

  • The drivers: How bad does Hubert believe that things now? How much – in Hubert’s view – will change improve them?
  • The restraint: How secure does Hubert feel with things as they are?

Drivers for change

If Hubert’s unhappy then he’s far more likely to welcome change. And the more unhappy he is, the more willing he will be to try something new.

If Hubert is comfortable with things as they are it may be hard to persuade him to do things differently – let alone to do things that are different.

So – in essence – a successful change needs to be driven by at least a moderate level of dissatisfaction.

But it also needs to overcome…

Restraints on change

Good research suggests that Hubert’s own feelings of security may be a critical barrier to change. And (by definition) those feelings will be very difficult for anyone except Hubert to determine! That’s because we’re talking about subjective perception, not objective reality. So to truly understand Hubert’s position you’d need to be inside his head. And seeing the world exactly as he sees it.

This subject is tricky enough to deserve a post of its own. So, for the moment, let’s assume we have at least a rough idea about Hubert’s level of felt security.

What effect will this have on his readiness to accept change?

Suppose Hubert is feeling insecure at the moment. That means his anxiety levels are high, and he will be unwilling or even unable to cope with change.

If, on the other hand, he is feeling very secure then he won’t be interested in new information or new ideas.

Drivers and restraints – how they work together

That – as you can see – creates a fascinating picture.

Ready for change? That depends on an individual's feelings of satisfaction and security

The shaded area is where Hubert is fairly dissatisfied –  but also feels reasonably secure. This is when he’s most likely to accept change.

To the right – where he feels almost completely secure – the chances of that become far smaller. If he feels both secure and satisfied (bottom right) then he will obviously be quite happy with things as they are. And If he feels completely secure he will probably become a contented and complacent ‘fat cat’. Even the boxes above, on the right, will be sparsely populated. That’s because new information and new ideas have little appeal to people who feel secure.

The left-hand column poses a different problem. If Hubert is here, even the strongest arguments will fail to cut much ice – because he is incapable of change. The very thought of change will induce the kind of panic that makes a rabbit freeze in the face of oncoming headlights!

So how can we find out where, on this diagram, Hubert feels he is?

And, more importantly, how can we move him to a position where he can and will change?

Documenting your process (or – how long does it take?)

Documenting your process (or – how long does it take?)

So you’ve started documenting a process.

Making a record of the best way to do a particular job.

Good decision!

But your first question is bound to be a very obvious one.

How long will it take?

Or, to put it another way: ‘What’s the process for documenting a process?’

And the answer, of course, is; ‘Well, that depends…’

It may not take very long

If it’s a straightforward process, then it won’t take you long to write it down.

So why wouldn’t you take the time to do it?

Suppose that the person who usually does it is away on holiday. Or off sick.

(And yes, that could be you. I know business owners are never ill and never take holidays. But even so…)

Either no one will do it. (Oops…!)

Or someone will do it. Badly. And wrong.

So what’s the choice?

Well, if it’s a planned absence you could take the time to tell someone what to do.

But if you have to do that more than once, you’ll wish you’d written it down!

So – why not take the time when you have it available? (And not while you’re trying to think of everything you need to do before you go away.)

It may take a long time

All right, so it’s a complex process. There’s a lot of detail. Many things that need to be ‘just so’. Perhaps some crucial interactions with other people.

So – if it’s that complex doesn’t it need to be written down?

Think how many opportunities there might be to get something wrong.

Better yet, is it worth thinking about why it’s so complex?

Does it need to be? Could it be simplified? Could it be done better? Or another way?

Time, perhaps, for a review. Or at very least a good, long think while you write everything down.

Because the simple fact is – that simple always works best.

So – how long will it take?

The simple answer? As long as it needs to. But however long it does take, it’ll be worth it for your business.

Commitment – is it there or not?

Commitment – is it there or not?

Any successful change process needs commitment from the people affected by it.

But how, exactly, do you measure commitment?

One definition might be that your people’s hearts and minds are aligned with their actions.

It sounds reasonable – but it could lead to hasty judgements.

Because people don’t always say what they mean, or mean what they say.

Some will apparently agree to a new process without question, and then continue to do what they’ve always done.

Others will grumble and complain, yet do pretty much what they have been asked to do.

Ideally, your process needs to have a way of telling the difference, so you can take the right corrective action with the right people.

It’s important not to assume that inappropriate behaviour automatically equals resistance to change. The simple fact is that most of us dislike change, and many of us love to grumble.

Habits, too, are hard to break. It’s easy for people to remain ‘trapped’ in old behaviour patterns even when they are no longer appropriate.

They may not even be aware this is happening – so their ‘hearts and minds’ may be fully engaged while their actions still lag behind what you are asking of them.

But suppose they just don’t want change?

Where there is genuine resistance, persuasion is nearly always better than forced conformance.

Anyone who doesn’t follow the process needs to understand how their behaviour damages the cause, and the impact that will have on themselves and others.

They may then need help and encouragement to develop new behaviours.

Of course, it’s possible they have good reason for resisting the new process. So it’s always advisable to get to the bottom of their issues before taking any action.

After all, they may have found a problem you hadn’t thought of!

But even if they haven’t, their feelings are important – especially if others share those feelings.

Forcing conformance may simply harden their resistance, and fatally damage your chances of achieving the change you need.

So rather than talking about ‘resistance’ to change, it may be more helpful to talk about readiness for change.

Conformance or commitment?

Conformance or commitment?

When it comes to change management, there are times when discussion is appropriate, and times when it isn’t.

For example, if the fire alarm is sounding and you’ve been ordered to leave the building, no one is interested in your objections to going outside. Even if you’re heading into the middle of a monsoon…

From a manager’s point of view, that’s the perfect model. There can be no argument, because:

  • It’s a quick win
  • It’s highly visible and easily measured.
  • And it doesn’t cost very much.

In fact it simply requires the slick application of carrot and stick. (In this case “Would you like to stay alive?” and “Oh, so you’d prefer to die, then?”)

Of course, most issues can’t be resolved quite so easily. Conformance is all very well, but if it’s a grumbling, resentful and rebellious conformance then you are simply creating problems for the future.

You need to think about hearts and minds as well – even if you have a sneaking sympathy for Nixon’s famous remark that if you grab someone hard enough in an (in)appropriate place, their hearts and minds will follow.

‘I insist you will like this…’

Gerard Hoffnung’s words were intended to be ironic, but some managers seem to take them literally. And the truth is that if an action needs to be done just once, or on a very few occasions, then conformance is all that’s needed.

People don’t have to think about it. And they don’t have to like it. They just need to do it.

The same does not apply to actions that must be regularly repeated. Here the simple application of sticks and carrots is rarely going to achieve the change you are looking for.

That’s when you will need commitment.

And you will also need to understand how commitment can be recognised, and the inevitable problems involved in asking people with ingrained habits to change their behaviour.