4 Ways to Incorporate Cash Flow Literacy into Your Company
If you don’t have cash or at least the ability to generate some money in the bank, your employees won’t get paid. That’s a principle that even non-accountants get in general. Unfortunately, many employees outside of the finance department are unaware of how company cash flow impacts their paychecks. It’s up to you, the business leader, to make them realize how their performance affects your financial health, both positively and negatively:
1. Employee Onboarding
During the onboarding process, you explain to your new employees and current employees, for that matter, how their actions affect the company’s cash flow. You might provide a fundamental cash flow activity matrix to help them understand how each of their tasks affects the company’s cash from beginning to end.
Explain how their performance impacts the company’s profitability and stability paths. If possible, assign them a mentor to help them understand its cash flow and how it affects the company.
2. Regular Staff Meetings
When you conduct regular staff meetings, you can use the time to discuss cash flow with your employees. For example, you might ask them to identify activities that improve the company’s cash flow and lead to profitability and activities that deplete its cash. You can also talk about ways to improve the consistency of cash flow.
It’s also a good idea to make sure your staff members understand their organization’s financial goals. For example, if your company is focused on increasing gross profit margin, your staff members should be able to identify how each of their tasks contributes to that objective. This can be a helpful exercise for business leaders, too.
3. Company Values
Make it clear to your employees that your company culture is about doing the right thing for the company, not just themselves. Say it’s not just up to them to provide the best service or products—it’s up to everyone in the organization. Explain that short-term profit objectives need to be balanced with long-term profitability.
For example, if you see a reduction in profitability due to high-paid employees taking excessive time off, talk to the employees and ask them to work extra hours to make up the lost time. This may not be as lucrative in the short term, but it helps to ensure long-term profitability.
4. Individual Performance Reviews
Make sure to review your employees’ performance in terms of how it impacts the company’s cash flow. This may not sound like a big deal, but it can be a powerful motivator.
For example, if you see that one of your employees prefers to be paid in cash, you can remind them how their cash-only payment impacts the company’s cash flow and profitability. If all of your employees are paid in cash instead of by check, the company has to find another way to make rent payments.
You could also see if there is a way to convert to a cashless company to save on processing costs. Identifying these flaws and correcting them can help your employees take responsibility for their performance and better understand how it affects the company.
If you want to create a healthy business, your employees must understand how their performance affects cash flow. When your employees take responsibility for the business’ performance, they’re more likely to be engaged. And engaged employees tend to perform better.
At New Wave Accounting, we provide end-to-end accounting and bookkeeping services that help scale and grow businesses. We understand small businesses and have worked with over 600 businesses in several industries. This has allowed our Gold Coast Accountants to understand each industry and create tailored solutions for our clients. So, if you’re looking for a business accountant on the Gold Coast, we’re here to help! Get in touch with us today!