Nobody wants to admit the business is struggling with cash flow. Moreover, this problem isn’t only a small company problem. Any company can face cash flow problems due to bad planning, unforeseen circumstances or disruptive influences. It’s tough to reduce office stress during a cash flow crisis.
Whether you admit the cash flow problems or not, your team knows. Hopefully, you’ve already established a cohesive, respectful team with good communication skills and an interest in doing what is best for the company. And they’re there to help even in dire times.
When cash flow is a problem, there are steps to lessen the impact on the team. This isn’t the psychologist’s view, but a pragmatic look from the trenches.
Manage your Behavior to Reduce Office Stress During a Cash Flow Crisis
Fear and anger are contagious. You aren’t immune to those feelings, but you need to express them constructively and manage your reactions. Don’t shoot the messenger. As the owner or manager, you’re ultimately responsible for the situation. They need to know the Captain is at the helm and working hard with the crew to avoid crashing into the shoals. Teamwork and cooperation in all areas of the company is critical.
Communicate About Cash Flow Problems
Hiding cash flow problems from inside and outside stakeholders often results in bigger problems later. This doesn’t mean broadcast every issue to the front page. Use discretion in what you disclose and more importantly HOW you disclose it.
Internal team members need assurance and consistency of message at all levels. Your team doesn’t want to hear your doomsday analysis. Don’t kid yourself, they already know, and you have the responsibility of helping them understand what’s being done to resolve the problem, as well as how they can help. Regular team communication is an important part of reducing office stress during a cash flow crisis. Remember, no matter how clearly you communicate, your message is subject to the filters of the person hearing it.
Be upfront with lenders and shareholders to ensure they know you’re working on the situation; understand what caused it and how plans will change to avoid the situation in the future. Realistic cash flow forecasts help in persuading external stakeholders to stand by you.
Support the Team During Tough Times
Each team member will feel a different level of responsibility and face different issues surrounding a cash flow crunch. Support is essential at all levels.
Accounts Payable or Bookkeeper
This is typically the person fielding all the angry vendor phone calls. They aren’t paid management salaries yet respond to requests for payment. Depending on the severity of the cash crunch – this might be the worst job in the company, right now. How do you support your bookkeeper?
- Plan weekly cash flow and determine payments to make allowing commitments and trust building with vendors.
- Stick to the plan! Broken promises break trust. With personal experience where, in a large ($100 million plus company), we held a weekly cash planning session determining each vendor allocation primarily based on the production needs to finish product, so shipments could meet commitments and generate cash. Several vendors discovered the VP of Purchasing was a soft touch and would call to demand payment, thereby changing cash commitments, destroying the trust of those vendors already promised and often disrupting the ability to complete production. The VP’s input was part of the weekly planning. It required intervention by the President to contain his actions.
- Offer relief and respect. The incessant phone calls in this situation not only drive up the stress level but prevent effective processing of accounts payable as well. Examples of relief:
- Allow the person to shut off the phones for certain periods in the week. With the volume of calls and processing workload, you might allow the phones to be silenced two afternoons a week.
- Make sure the vendors understand you’re working on paying them when phones are quiet. Do this by leaving a detailed voice mail message that says, “We‘re working on processing vendor invoices this afternoon and we will return your call starting at 8am tomorrow.”
- Pay off small vendors, if possible. These are often the most insistent and time-consuming. The vendor volume and frustration level reduce significantly, thereby producing relief.
- Stick to the plan. Once an atmosphere of trust established by following through on commitments exists, vendor call volume goes down.
- Offer to take the most difficult calls.
- Don’t allow vendors to harass team members. When a caller starts to use foul language, have a process to inform the caller of the need for respect and politely let them know you expected to have a courteous conversation. “Sir, please stop swearing. Sir, you need to discuss this in a respectful way. Sir, if you can’t discuss this in a respectful way, I will need to hang up. Sir, I am hanging up. Please call back when you can speak respectfully.” This approach gives team members control over the situation.
- Treat the hourly employee to an extra-long lunch hour, paying for both the time and the lunch.
- Provide a gift card or other form of appreciation for the job they are doing.
Sales and Marketing
While all areas of the Company feel the stress, sales and marketing drive customer commitment. Often incremental sales are very valuable when cash flow is dire.
- Plan weekly cash flow including sales pipeline and expected sales and/or deposits.
- Involve Sales in collections efforts, if possible.
- Providing additional tools to shorten sales cycles, such as “one-time” or time-limited offers, coupons, etc. may help edge customers to close sooner.
- If customer expectations aren’t being met, due to late shipments or other issues, communicate to sales and engage them in the customer communication.
- Offer support and respect. If customer expectations aren’t met and/or sales numbers are off, Sales typically has a more direct pocketbook effect.
- Depending on the competitiveness of the sales team, a contest may excite them.
- Provide more recognition for landing a particular customer or improving the speed of a sales close etc.
- Maintain motivation – it is generally not a good time to revamp the commission structure or cut marketing support (i.e. no sales literature)
- Temporarily change the advance policy, if production is slowing the sales commission cycle.
- Consider adjustment to sales compensation when cancellations increase due to slow production.
- Ask for additional sales and marketing input on shortening the sales cycle or presenting a cost-effective strategy for a new market.
In a cash flow crunch, Production must do more with less. How can they get the product through the cycle faster, allowing quicker billing and collections? On the surface:
- Plan weekly cash flow including optimizing the production requirements with the fastest completion, billing, and collections.
- Identify key inventory shortages hindering production/shipments and include them in the weekly cash planning. This may require ordering in smaller quantities increasing price per unit.
- Engage the shop floor team to suggest process streamlining or scheduling changes to increase available hours at straight time rates with changes in vacation schedules or shift work adjustments.
Manage your Response to the Cash Flow Crisis
In my experience, cash flow problems bring out either the best or worst. By applying some of these ideas and others you may think of, you can present a confident and calm leader reducing the stressors on your team and yourself.