A Case Study
“You’re leaving money on the table,” I said, peering across my client’s office. His brow furrowed, then relaxed with a nod of acceptance – as if he already knew it deep down, and was relieved someone else confirmed it.
“How much, and how do we fix it?” My client leaned forward over his notepad, pen in hand.
“You have 3 clients who pay their bills begrudgingly, 60 days or more past due. After talking to your office manager, it seems these same 3 clients tend to require the most hand holding, and are sucking up your administrative resources.
“I would cut them, immediately, or only accept payment up front with a limited scope of service, if they choose to stay on with you. Your people will be happier, and can focus on higher payoff tasks. Identify the common traits between these clients, and refuse to accept anyone like this again. Administrative turnover should drop. Remember, turnover has a hidden cost of 50% of the lost employee’s salary to onboard and train new staff.
“Secondly, you have an employee who spends twice as much money as anyone else on the company card. Some of this is legitimate fuel expense, but about 80% of his charges are meals and entertainment. We’ve looked into his attributable sales, and he is only performing about average. His sales are $4 for every dollar you spend on him.
“Meanwhile you have another employee who is bringing in $12 for every dollar you spend on her. She needs to be training the rest of your sales staff on her sales process and presentation; she should also start getting small commissions from everyone she trains to incentivize her new management role.
“If you can get the rest of the sales staff to perform half as well as her, you are looking at an extra $60,000 in the next year, without spending an extra dime in overhead. Everyone on the sales team will be earning more money, and will likely be happier. Again, turnover should drop in the sales department. I think this is a reasonable goal to shoot for in the next year.”
I could feel him relax as the elephant in the room was called out, and a new direction to get cash flow back on track was revealed.
Are You Leaving Money on the Table?
This is perhaps the best argument for having a proper accounting system in place. When we do big clean-up and catch-up projects for clients, we go through years of past data and organize it. This can reveal truths that no one can find by simply looking at the bank account.
Almost every time we build a system for a new client who has never paid attention to accounting, we find many times the money spent on our fees in overspending and lost sales opportunities.
Good accounting systems always pay for themselves. This is especially true for companies who have never had one before. This is how you get your return on investment on your accounting system – by making better decisions that directly save and make you more money.