Use these eight tips to plug those costly profit leaks.
By William Lynott
Profit leaks lurk deep inside almost every small business, silently draining off hard-earned dollars. Nowhere is this truer than in a highly specialized business such as water well drilling.
Some leaks are harder to detect than others, and some far more damaging than others. Together, they can form a major obstacle on the road to optimum profits.
Here are eight steps you can take right now to smooth out the path to a consistently healthy bottom line in your business in 2020 and all the years to come.
1. Polish your image.
Because of the personal nature of water well drilling, the element of trust tends to play a bigger role in the selection of a contractor than it might in most other types of businesses. So, how do you go about polishing your image of trustworthiness?
Among the most important building elements is a willingness to listen, and that’s something that does not come naturally for most of us. Most people want to do more talking than listening. Although we may not be conscious of the reason, most of us feel more comfortable in the company of that rare person who is a good listener.
Learning to listen well is not an easy task. It takes a great deal of self-discipline, but from a professional standpoint, it’s well worth the effort.
We tend to trust people who are willing to take the time to listen to what we have to say—and we tend to trust people who seem to make a genuine effort to understand what we are saying. Sharpening your listening skills will go a long way toward building your professional image and plugging a potential profit leak.
2. Make full use of banking technology.
Your bank would like you to pay your bills electronically, and they’re making it easy and profitable for you to do so.
Until recently, the idea was slow to catch on. Change does not come easily to most of us, especially when it comes to how we handle our money. Fears on the part of many about the security of paperless transactions added formidable hurdles on the road to a checkless society.
Lately, however, the sluggish stream of small business owners viewing and paying bills online is becoming a raging torrent. At today’s cost of more than half a buck postage for each check mailed, plus the cost of buying and writing checks, the savings in money and time is becoming an irresistible lure to computer-savvy owners and managers.
Online banking providers now offer a wide variety of easy-to-use systems, and experts say security is a minor concern. Some experts claim that banking and paying bills online actually reduces the odds of identity theft by cutting off thieves’ access to the papers they need.
Improvements in technology and user-friendly websites make online bill paying almost as easy as logging on to check your email. Check with your bank. Chances are it offers free online bill paying. You’ll be surprised at how easy and profitable it has become.
3. Hire with caution.
Yes, finding employees up to your high standards is more difficult than ever. Still your staff, whether one person or several, is the cornerstone of an efficient and profitable operation.A single employee functioning at less than optimum and honest levels can wreak havoc on your business and on your bottom line.
At the very least, check all references and do a search on criminal convictions before hiring. If you have any doubts or unanswered questions, don’t hire that person.
When interviewing a potential new hire, take the time to listen. Don’t talk more than you listen. Make an effort to gauge the person’s ability to blend in with the existing culture of your operation and the personalities already on your payroll.
Increased turnover is only one of the problems generated by hiring the wrong person. A personality that isn’t comfortable in your environment can harm your business in ways far less obvious.
4. Concentrate on human relations.
Once you have staffed your business with the right people, it’s up to you to make them feel they have found the right job. With all the daily pressures and stresses which you must deal with, it’s easy to overlook the emotional burdens that lay heavily on your employees.
Favoritism, or even the appearance of it, can be a deadly enemy of efficient and profitable operations. An employee who feels he or she is the victim of favoritism is likely to develop a grudge that can cause serious damage to your business.
Make a special effort to show appreciation to your staff in a fair and equitable manner. The importance of skillful human relations in a modern business environment is well established. Even the appearance of a lack of respect for an employee can undermine your best efforts to develop a pleasant working environment.
Another common mistake made by some owners is failing to accept the blame when something goes wrong. A reputation for always putting the blame on others is a management deficiency that will eventually exact a heavy toll in the form of employee unrest. Being in charge means being willing to take responsibility for whatever happens on your watch.
5. Be aware of human weaknesses.
Despite the best of pre-hiring screening or the length of service of trusted staff members, human susceptibility to temptation will always be present. While your natural inclination may be to trust the people you hire, you should institute safeguards to minimize the chances of losses due to ever-possible dishonesty or simple carelessness.
Deposit revenue receipts daily, and make no exceptions. Make sure a paper trail is created for every transaction involving the movement of cash. Be especially watchful over the system for handling petty cash. This is where embezzlement usually begins.
If you have good reason to believe someone may be stealing from you, report it to the police at once. If you put off that unpleasant duty, you could be making it more difficult to resolve the problem.
6. Take action on marginal employees.
Discharging an unproductive or disruptive employee is the sort of unpleasant task most business owners and managers dread. However, failing to take action when necessary can be a costly mistake.
Keeping a problem worker around to create more trouble makes a bad situation worse. That’s not fair to you or to your other employees. That can result in added stress on other employees who may have to take on more work, and dissension among those who cannot understand why you are keeping the employee on your payroll. This, in turn, can negatively affect the treatment of your customers.
In short, once you identify a disruptive or unproductive employee, it is best to face up to the unpleasant task of terminating the relationship. Postponing it can only lead to a more serious problem later on.
7. Mind those accounts receivable.
If you do any of your own billing, you must maintain good records of how much money your customers owe you. Whatever system you use to keep track of accounts receivable, it must be capable of telling you whether any accounts are overdue by 30 days or more. If that comes to 10% or more of your total A/R, you need a more aggressive collection policy.
The more casual you allow yourself to become about collecting the money owed to you, the more casual your customers will become about paying you.
8. Watch those bank statements.
Never forget that banks are in business to make money and all of their income comes from customers like you. In today’s increasingly competitive environment, banks have turned to new and costly fees to bolster their revenue.
Many of their charges are seemingly small and harmless, but if left unnoticed they can relentlessly eat away at your bottom line. That’s why it is so important to have someone responsible for scanning each month’s statement to ferret out charges that you can avoid.
While it may not be possible to bulletproof your operation completely, careful adherence to these eight management techniques will greatly reduce your exposure to unnecessary and costly losses.
Bill Lynott is a management consultant, author, and lecturer who writes on business and financial topics for a number of publications. His book, Money: How to Make the Most of What You’ve Got, is available through any bookstore. You can reach him at email@example.com or through his website: www.blynott.com.