Tuesday, March 13, 2012

Does Your Checkbook Leak Like A Bad Faucet?

You know which faucet I'm talking about.  A steady drip, about once a second; it has been that way for months and you keep saying you will get to it.  But you are in the glass business and running your shop or crew is more important than fixing this annoying leak.  According to the United States Geological Survey, one faucet, dripping only once per second, will waste 2082 gallons of water a year (even more in leap year!). 

I'll bet that most of us have the same problem with our checkbooks.  We don't take the time to fix the leaks.  We have been getting the same bills for years, and just pay it, letting the checkbook leak.

So, here comes Paul The Plumber with leak-fixing tools.  
  • Sign every check yourself.  No exceptions.  Running our glass fabricator, the owner, Chuck, or I would hand sign every check for materials or services.  We did have the payroll company do the employee checks but audited the payroll journal.  Yes, it took time, about four hours every ten days.   We checked the price against the purchase order and the quantity billed against what our receiving ticket showed.
  • We were not suspecting or looking for fraud.  We were looking for leaks.  About ten percent of our check run caused questions.  Why was that item purchased?  How is it used?  Didn't we just buy that from a different vendor?  Why are we using so much?  Can't we combine this with other items from other vendors to earn bigger discounts?
  • We always paid the bills with the biggest cash discounts first.  In fact, one of the biggest sins in our company was sitting on an invoice from a vendor causing us to miss a discount date.
  • In tough times we would reduce spending.  Travel was reduced.  We would ask why a certain truck was using more fuel than others?  Did it need a tune-up, or did the driver just have a heavy foot?  We kept maintenance to a high standard, which actually reduced emergency calls for high-priced weekend labor and kept machinery running smoothly.
  • Drip...Drip...Drip...the renewal of an advertising bill in the yellow pages, which on asking our customer service people, never brought in a phone call they could remember.  A membership in a local chamber of commerce, although we never went to a meeting or gained any benefit.  Buying  desk calendars for each office worker each year, when we looked at desks and saw that only half of our people used them.
  • Cut down the number of vendors you have.  Concentrate your purchasing power and you will get lower prices.  Even though you feel that buying everything at the lowest cost from ten different vendors saves money, your bookkeeping costs are bigger, there is more confusion in your receiving area, and ten times the possiblities for mistakes.
  • Before you buy more of a supply type product, ask your team how they use it, and most importantly why?  Most purchases are force of habit and may not really be needed...it is always been done that way and no one has questioned it.
I know these may sound like pennies and nickels in a multi-million dollar organization, but the real impact came from the rest of the company.  They knew we were on top of expenses, and they ran their corner of the firm they same way.  We led by example and it worked.  Chuck would sign checks for a year, and then I would take a year.  You see the long term picture this way.  We found out that when we switched off weekly, we would miss lots of little things that were repetitive.
People would come to us requesting special funds for a project.  Just about every time we would say yes, because we knew that our leaders would have thoroughly researched the situation and would strongly feel we would benefit.

Look at every single expense that goes through your company.  Don't delegate this important job to anyone else.  You'll waste less water money.

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