Sleeping at Night – Tips for Catching Trouble Early

Running a company is full of risks which all have the potential to cause you sleepless nights.

Paradoxically it’s not necessarily the obvious ones that can threaten your existence – the lack of customers, the new legislation, your competitors new product.

It can often be the silent enemy that creeps up you over time and before you know it. Bam! You have one almighty personnel issue, fraud, horrendous customer problem, or a huge hole in your sales projections.

Here are 10 nasty issues with little tips that should minimize those surprises. I recommend that the CEO/Board Member performs these controls on a regular basis, in addition to the normal checks and balances, to keep everyone alert and on their toes.

Cash Fraud – Ensure the bank reconciliation is done daily/weekly and then go check it on a random basis. If it’s out by 10 cents that could be $100,000.10 out one way and $100,000 out the other way.
In other words it’s out. It doesn’t reconcile. Go investigate!
Manipulation of Accounts Receivable – Take a random selection of sales invoices and follow the cash receipt through the system all the way to the bank statement. The actual bank statement. Take one customer do this for all transactions covering the last 6 months.
Manipulation of Trade Creditors – Take a random selection of original supplier statements and match these to the balance outstanding in your books.
Fabrication of Sales Pipelines – Take 3 prospects in each sales persons pipeline and call them as a quality control check. Use the excuse that you are calling to ensure we are understanding their needs and that we are acting with sufficient urgency!
Sales Execs Intimated by Bad Apple – There is a theory that organizations have 4 types of people – Players,those who are winners and natural leaders; Spectators, those who do good work but can be intimidated, Terrorists, really smart people who have been wronged and prey on the weak. You need to intercept the terrorists before they intimidate your weaker sales folk. If not policed they can create negativity, fear, uncertainty and doubt. By the way the fourth category are called Corpses and they are not a problem they just have to moved on to a more appropriate company.
Sales Dropping Caused by Hidden Discounts – Watch for deals being closed with hidden discounts. A great Purchase Order has arrived for $95,000. (yes well it was actually $134,000 deal with a $39,000 discount but you will never know)
Randomly check your sales invoices to your sales prices. Discounts given comprehensively over time, covertly, can destroy business models.
Sales Forecasts Never Arrive – Trap and expose the credibility gap by deploying the Common 5. Take a few of your under performing sales team, compare this months 6 month sales forecast with last months version and hey presto you have the Common 5, 5 months to compare one forecast with another. Relentlessly measuring this metric makes people better at forecasting.
Inappropriate Behavior – It is too late when the sexual discrimination claim hits your desk. Get the message out often and early that as CEO if any member of staff feels uncomfortable about another employee’s behavior they can reach out by phone or email. Early detection is a must or it’s tears before bedtime.
Really Unhappy Customers – Customer support calls, maintenance tickets, any form of feedback is precious evidence for a business owner. keep on top of the game. Take a random sample of customer support tickets and dig deep into the issues and the solution proposed.
Lost Revenue Factor – Large companies are cash hoarding. Cash balances as a % of total assets are at the highest level since 1963! Guess what – that is reflected in your accounts receivable days being dire. It is not uncommon for a $100,000 sales invoice to be held up for payment by a $1000 query. One little line item screwing up $99,000. Lost revenue factor $99,000. Don’t let it happen to you. Build a robust query resolution system to ensure the smooth collection of funds.