At 100% Effective, we encourage everyone to think about how they impact the working capital position of their organisation. Small improvements from each individual will add up to a big difference overall. No matter what business you are in, the actions you take and the tasks you complete will all affect available working capital.
BUT how many people really understand the concept of working capital and how they affect it? In our experience the answer is very little despite the fact that working capital is the ‘oxygen’ in every business and without it, no organisations can survive or grow.
We think that every person in your business should be able to write down at least 10 ways that they personally affect working capital, either in a positive or a negative way. I asked some of the 100% Effective team to give me examples of how they think that they personally impact working capital and this is what they said:
Chris in IT;
- If our websites go down (offline), we can’t receive orders or enquiries, thus reducing our income,
- If I purchase a computer that is more expensive than it needs to be, I will have tied up money in the business that didn’t need to be,
- If our phone contracts are not optimised, we spend more than we need to,
- If I buy a printer that has expensive toner replacements, it will cost us more to use it,
- If we don’t have a procedure that everyone works to for emails and backups, we will need bigger servers costing more money,
- If our websites have poor quality text or images, it affects how we are viewed by our customers,
- If I spend too much on a contract to develop animation on our e-learning course then I affect the overall profit of the course,
- If I take too long to solve a consultants IT issues, their available time with clients is affected,
- If our database of clients is not accurate, sales may be lost,
- If I don’t complete my month-end reports, management doesn’t have up to date figures to drive the business forward and make decisions.
Emma in Finance;
- If I don’t send out an invoice as soon as possible then we will delay being paid and cash flow will be affected,
- If I make a mistake on an invoice, it may not get to the correct person, in turn, the payment may be impossible or delayed
- If I don’t monitor accurately when an invoice should have been paid, I will not know when to chase payments and ensure they come in on time,
- If our processes are not standardised and easy to use then when I am on holiday and others have to complete my tasks it will take them longer than it should and we will waste time and money,
- If expenses are not filled in correctly, I will have to waste time chasing each consultant,
- If I can’t give accurate and timely figures to the MD, I delay informed decisions from being made and we may have to increase our overdraft,
- If we spend too much on hotels, meals and other expenses we end up wasting money. We need to find the best deals,
- If we have clients who don’t pay on time and in full then we waste time chasing them and risk not being paid,
- If I don’t ensure that we have a purchase order for every training or consulting engagement then we may not get paid,
- If we pay too much for our insurance then we are wasting money.
Sharon in Admin;
- If I don’t book a high-quality meeting room for training courses, clients will not be happy and we may not make further sales because of poor customer satisfaction,
- If I spend too much money on hotels or training rooms, we have wasted money,
- If I don’t send out training manuals on time to our venues, customers will not be happy and future sales may be affected,
- If it costs too much to print materials then we waste money and tie it up in the business meaning it can’t be invested in marketing to gain more business,
- If we spend hours instead of minutes completing tasks then we waste money,
- If I don’t pass on messages quickly and accurately to the sales team, they may not make a sale,
- If we don’t send out joining instructions on time, our clients might not be able to make an event and we lose money,
- If I don’t book travel in a timely manner, prices will go up the nearer we get to the date of use,
- If I don’t provide the information needed to complete invoices on time, it may delay issuing the invoice and affect our cash flow,
- If I don’t answer emails quickly them we may miss an opportunity.
David in Sales;
- If we don’t answer sales enquiries on the same day then we may miss a good opportunity and reduce income,
- If I don’t explain our training and consultancy offerings effectively to potential clients then they may not buy from us,
- If I am not accurate in our pricing then we may miss opportunities or make less profit reducing income,
- If I don’t listen to the client, I will not be able to offer them the best solution and we will not be selected,
- If I organise my sales trips inefficiently then I will spend too much time travelling rather than with clients,
- If I write every email and proposal from scratch, I am wasting time when I could be selling,
- If I don’t collect all the correct information from a client when they sign up with us, it may affect delivery and invoicing,
- If I don’t understand my products and services then I will waste our clients time and will not make a sale,
- If I print off too many items for a meeting, I have wasted money as they will not get used, and
- If meetings start late, overrun or are not efficient, we will be wasting potential selling time.
This can be a very illuminating exercise. So why don’t you see if you can think of 10 ways that you impact working capital yourself? Ask others in your team as well.
Everyone needs to understand working capital. Join our mission. Think about it TODAY!