It Doesn't Matter Who Signs the Cheques12th May 2016
A few years ago, I was working with a distressed business that had begun a process of formal insolvency. While I was with the interim CEO in the call centre, surrounded by people with headsets, he was approached by someone who wanted him to sign a cheque.
He screamed out (…and I’m leaving out some of the profanity here): “I don’t care who signs the cheques – who signed the purchase order?”
It turned out that someone in the company had ordered much more computer equipment than the company could afford – or get rid of. But by the time the CEO was asked to sign the cheque, the merchandise was already in the warehouse. Because the CEO didn’t have control over the purchase orders, he had no choice but to pay up anyway.
The CEO had it right.
If you’ve got to the stage of having to sign a cheque, it’s already too late to start managing your expenditure – the damage has already been done. You will already be committed to making the purchase whether you like it or not.
And yet many companies are very strict about who signs the cheques (or more likely electronic payments these days), and not nearly strict enough about who places the orders in the first place.
As CEO, it is your responsibility to ensure that money is flowing through your company properly.
If this is a problem in your company, it may be a good idea to take temporary control and sign off all orders yourself. That way you can see what employees are spending money on and how much, and if necessary challenge them in time to make a difference.
You may discover that even if they are spending reasonable amounts, they are spending them on unnecessary items, buying too much, or paying too much. Check the prices they are paying against those you can get elsewhere. There are plenty of businesses out there suffering because they’re not getting the best deal.
Challenge everything, from paperclips to £100,000 pieces of machinery. You will find that as soon as your team realises that their orders will be properly scrutinised, they will be much more careful about their orders themselves.
If your business is operating with slim profit margins, like the one I described above, then those savings could be incredibly important to the success or otherwise of the entire operation.
If this is a process you would like help with let’s talk. Not only can we help you sort out your expenses and cashflow, we’ll put in place procedures to ensure you always maintain control.
Garry Mumford is author of the free guide, The 5-Step Process To Get Your Customers to Pay on Time, Every Time. He is founder and Director of Insight Associates, which since 1992 has been providing owner managed businesses with the financial insight essential for development and growth.