Our company president wants to grow our small business. We’re both cash-strapped and “people-strapped” at the moment. Can you recommend some small business growth strategies I can implement at the department level (the areas under my control)? I’m responsible for our business operations, including accounting, IT, and HR.
Struggling with Small Business Growth Strategies in Sacramento
The first comment I hear in the business world is always, “I wish I owned my own business.” To which I always say, “Be careful what you wish for!”
A close second statement is, “I want to grow my business.” To which I also say, “Be careful what you wish for!”
The truth is, most small businesses aren’t set up for growth. A lack of cash and a lack of the right people are often roadblocks, but of course, decisions about growth are rarely left to the department heads. Yet, much of the heavy lifting of growth positioning does fall to you, which sounds very much like the situation you find yourself in now.
The good news is, there are many actions you can take to help prepare your company for future growth. Here’s how to implement small business growth strategies at the department level.
Address the Low-Hanging Fruit (Cashflow Problems) First
As you help position the company for growth, the first area of focus is addressing the cashflow problem. If the need for cash flow is truly dire, as Hippocrates would say, “desperate times call for desperate measures.” There are many ways to address a cash flow issue (see my blog on handling a cashflow crisis for more details).
However, your “cash-strapped” issue is a typical problem. As the head of the accounting department, you’ve probably already taken the following actions. It never hurts to revisit best practices, though, to ensure your department is staying on top of your cash flow.
Best Practices for Addressing Business Cashflow Issues
- Don’t give customers a reason to avoid payments. Are all the invoices correct when mailed and emailed out to clients? Are the statements going to the proper addressee? Are the facts and details of the invoice clear and correct?
- Follow up in a timely fashion. Do you pursue past due balances immediately? Do you increase contact and collection efforts as the balances age?
- Communicate with your vendors regularly. Are there alternate terms for methods of payment, you could work out?
- Continue to pay your payroll tax liabilities. It may be tempting to borrow against payroll taxes, but don’t do it. Not only are the fines onerous but there is real liability associated with skipping out on this fiduciary responsibility.
- Renegotiate payment terms, if needed. Consider your defined payment terms for customers and vendors. Can you request deposits from customers? Could you extend payment terms with vendors?
Cash flow issues are certainly a concern, but there are steps your department can take to address them and better position the business for growth.
Shore Up Financial Operations to Combat Cashflow Issues in the Future
Making the financial operations area as strong as possible is a critical step in small business growth. To shore up your financial operations, begin by creating timely, accurate, and meaningful metrics and financial statements. Remember, these financial areas are critical to support leadership decision-making.
Financial Operation Areas to Address:
Develop meaningful metrics.
As the head of a department (or several departments), you play a vital role in assisting leadership with defining metrics and setting parameters. The way you define metrics will vary by the type of business and the departments within the business.
For example, sales team metrics (company history shows one sale per 100 calls) might be set at 100 calls/day. A service business or support center might measure chargeable time against a standard, while a call center may measure against dollars collected. Metrics might be issued daily, weekly, monthly, or in the case of fast-food sales, by breakfast/lunch/dinner in virtually real time.
As you set metrics, evaluate the accuracy and sophistication of existing information, along with the ability to affect the outcome, against the time needed to do the reporting. Remember that “reporting just to report” is meaningless.
Establish a closing schedule to generate a rhythm of reporting in the business.
For example, the sales team should know they need expenses in by the 5th workday, inventory needs to be entered by day 3, etc. Leadership knows they will have their information by the 7th workday. These clear-cut reporting parameters keep everyone on track.
Clean up your chart of accounts.
Examine the state of your chart of accounts and follow best practices. Meaningful decisions are fed by meaningful statements that come from a meaningful chart of accounts.
Minimize time spent on finding and fixing errors.
While this seems like a no-brainer, chasing changes to previously issued numbers or an update to the wrong file waste valuable time. Mitigate these possibilities by:
- Limiting access to only those who need to work in the systems.
- Proper training for those who access systems.
- Turning on audit trails so discrepancies can be traced to the root cause and prevented in the future.
Assist in analysis.
Prepare comparative financial statements, noting any unexpected or significant variances. Report on changes in product line profitability, margins or other items of importance. Evaluate significant drivers and note any impact on the financials, including the following: differences in workdays in the month, rework changes, collection issues, changes in overtime hours, machine down time, etc.
Use a real and robust accounting system.
Touting a reputation of being “user-friendly” isn’t a criterion for an accounting system. Make sure there are adequate controls and that the system has a balance sheet so you can calculate the cash flow.
Small Business Growth Strategies with Staffing Shortages
Now, when it comes to being “people-strapped,” you may be facing a different dilemma. First of all, does “people-strapped” mean a shortage of staff (because cash is too short to hire) or do you mean you’re staffed with the wrong people?
If you’re staffed with the wrong people, let me give you some hard-earned advice: trade up immediately!
Trying to fix a broken situation or spending time encouraging people to meet their job obligations isn’t a luxury of the small business. This is especially true if the biggest block to implementing small business growth strategies is that your company is short on both cash and people.
Obviously, there are HR considerations and rules to abide by, as you shore up your staff and assemble the best team possible (with attention to your cash constraints). But I encourage you to create a strategy to optimize voluntary and involuntary turnover (hiring and yes, firing) to strengthen the team. Ultimately, the right people will only help with the growth of the business.
Some Ideas to Build the Right Team for Growth:
- Offer creative compensation for disciplined team players. Work to create an atmosphere and compensation structure to meet their needs. Remember that broadly defined, “compensation” includes work hours, place of work, amount of travel, vacation and other needs as defined by the team member. This isn’t to say you promote a “do what you want” policy, but that you design the best situation to retain or attract good employees, given your cash constraints.
- Consider temp-to-hire positions. While these can be more expensive in the short-run it allows you to assess how employees will perform long-term. Consider it “a try it before you buy it” strategy that may save your company the 30%+ of salary (per US DOL) that a bad hire costs a company. Not to mention that this saves you on the hidden costs of bad morale, negative productivity impact, administration and time required for the new candidate search.
- Follow the rule: hire slow and fire fast. Set clear expectations for employees with strong policies, procedures, and guidelines during the onboarding process. Don’t hesitate to fire employees who don’t perform up to par. This also sends a message to others about expectations as you build up the team.
A good team will give you more for every dollar spent. They will contribute to the morale of the company and display a vested interest in the future of the business. A great team contributes to great company culture and plays an integral role in the company’s success. Don’t shortchange the business with the wrong staff, especially if you’re a small business, where everyone needs to pull their weight.
Address Operating Inefficiencies
Once you’ve addressed your issues with cash flow and your staffing deficiencies, you can help position your small business for growth by finding other areas of operating inefficiencies to address. Leadership should be focusing on operations to prepare the company for the next phase. This includes building a growth-ready infrastructure.
At the department level, you can assist leadership by ensuring the following operating areas are addressed:
- The roles of each team member are clearly defined, responsibilities and expectations are outlined. Does everyone on your team understand the scope of their job description?
- Policies and procedures are well-documented. Does your team have a written procedure for each activity? Are the procedures clear and easy to follow?
- Avoid double-handling data. Data should be entered in a timely, accurate, and consistent manner, with as little “pass around” as possible.
- Cross-train every member of your team. Cross-training is a great way to test your procedures and discover gaps in job outlines.
- Evenly distribute tasks. Are jobs delegated? Do one or two members of your team end up doing the bulk of the labor? Ensure leadership at all levels are effectively delegating tasks.
- Review your internal controls. Do you have steps in place to “keep” your team honest? This includes limiting access, reconciling with independent and outside sources, and cross-training.
- Train team members to address issues when they arise. This includes:
- Implementing stopgap measures to eliminate future issues.
- Fixing mistakes at the source.
- Learning from missteps and changing behavior.
- Planning around bottlenecks.
- Running exception reporting.
- Communicating with leadership (and having access to leadership).
- Adjusting future processes to accommodate changes.
- Train team members to address issues when they arise. This includes:
Working on growth strategies for your small business means doing your due diligence to ensure your operations are running smoothly. Addressing your cash flow issues as well as your staff-shortages will help you eliminate many of the roadblocks, but it’s an important time to examine the overall health of your business and best practices you have in place.
Depending on your relationship with leadership, you should be able to candidly share your concerns as you implement these steps to help your business grow. As part of the company, you have a vested interest in its success. Any observations will only serve to better position the business for a bright future.