Operations

Eight Ways to Bulletproof Your Bottom Line

Posted on July 1, 2008

 

Plugging those costly profit leaks can be critical to your operations when revenues fall and the balance sheet gets squeezed

 

Profit drains become even more painful during leaner, slower economic times, such as what many industries, including limousine and chauffeured transportation, are experiencing nationwide.

 

Here are eight steps you can take to smooth out the path to a consistently healthy bottom line in your transportation business:

 

01 Clamp Down on Those Accounts Receivables

IF YOU DO ANY of your own billing, you must maintain comprehensive records of how much money your clients owe you. Whatever system you use to keep track of A/R, it must be capable of telling you whether any accounts are overdue by 60 days or more. If that comes to 10% or more of your total A/R, you need a more aggressive collection policy. The more casual you allow yourself to become about collecting the money owed to you, the more casual your clients will become about paying you.

 

02 Manage Your Cash Flow

COLLECTING WHAT IS DUE you is only part of the job. How you manage the revenue generated by your business will have a great influence on how much of that money finds its way to your bottom line. Profitable management of cash flow calls for never allowing any of your money to sit idle. The worst place to deposit your daily receipts is in a low-interest/no-interest checking account. Instead, open a money market account at your bank and have it linked to your checking account for telephone or online transfers. Deposit your daily receipts into the money market account where they will immediately start drawing interest. Keep a minimum balance in the checking account and transfer cash by phone or online only as needed to cover checks.

 

03 Don’t Be In a Big Hurry to Pay Your Bills

EVER NOTICE HOW CHECKS are slow to come in from people who owe you money? That’s because hanging on to cash as long as possible keeps that money available to draw interest or to work in a business. Set up a system that provides for paying bills only when they’re due. Don’t jeopardize your credit standing by paying bills late. Pay your bills when they are due -- not before, not after.

 

04 Make Use of Available Technology

YOUR BANK WOULD LIKE you to pay your bills electronically, and they’re making it easy and profitable. Lately, the sluggish stream of Americans viewing and paying bills online is turning into a raging torrent. At today’s cost of 42 cents postage for each check mailed (sure to continue rising), plus the cost of buying checks, the savings in money and time is becoming an irresistible lure to computer-savvy business owners. Service providers now offer a wide variety of easy-to-use systems, and experts say that security is a minor concern. “Online bill payment is at least as secure as conventional payment [paper checks],” says Elizabeth Robertson, senior analyst at the research firm, Tower Group. Some experts say that banking and paying bills online actually reduces the odds of identity theft by cutting off thieves’ access to the papers they need. User friendly websites make online bill paying almost as easy as logging on to check your e-mail. Check with your bank. Chances are that it offers free online bill paying. You’ll be surprised at how easy and profitable it can be.

 

05 Hire With Caution

YES, FINDING GOOD DRIVERS is more difficult than ever. Still, your staff is the cornerstone of an efficient and profitable operation. A single employee functioning at less than optimum and honest levels can wreak havoc on your business and on your bottom line. At the very least, check all references and do a search on criminal convictions (not charges) before hiring. If you have any doubts or unanswered questions, don’t hire that person. Always check with former employers. It’s not a foolproof system, but it can help to avoid hiring the wrong person. Increased turnover is only one of the problems generated by hiring the wrong person. A personality that isn’t comfortable in your environment can harm your business in ways that are far less obvious.

 

06 Be Aware of Human Weaknesses

DESPITE THE BEST of pre-hiring screening or the length of service of trusted staff members, humans will always be susceptible to temptation. While your natural inclination may be to trust the people you know, you should institute safeguards to minimize the chances of losses due to ever-possible dishonesty or simple carelessness. Deposit receipts daily. Make no exceptions. Create a paper trail for every transaction in the business. Be especially watchful over the system for handling petty cash. This is where embezzlement usually begins. Employee theft of material is not usually a problem for chauffeured transportation operators. Employees who stretch their hours or park for two-hour lunches can be a more serious concern. To help control this, some owners are installing electronic monitoring devices on their vehicles. They record where and when a vehicle has been, and whether it went somewhere it shouldn’t have. In a chauffeured transportation business, abuse of payroll is potentially one of the most costly profit leaks.

 

07 Take Action on Marginal Employees

DISCHARGING AN unproductive or disruptive employee is the sort of unpleasant task that most business owners dread. However, failing to act when necessary can be a costly mistake. Keeping a problem worker around to create more trouble worsens a bad situation. That’s not fair to you or to your other employees. That can result in added stress on other employees who may have to take on more work, and dissension among those who can’t understand why you are keeping the employee on your payroll. This, in turn, can hurt the treatment of your clients. Once you identify a disruptive or unproductive employee, it’s best to face up to the unpleasant task of terminating the relationship. Postponing it can only lead to a more serious problem later on.

 

08 Concentrate on Human Relations

ONCE YOU HAVE your business staffed with good people, it’s up to you to make them feel that they have found the right job. With all of the daily pressures and stresses with which you must deal, it’s easy to overlook the emotional burdens that lay heavily on your chauffeurs, dispatchers, or other employees. Favoritism, or even the appearance of it, can be a deadly enemy of efficient and profitable operations. An employee who feels slighted by favoritism is likely to develop a grudge that can seriously damage your business. Try hard to show appreciation in a fair and equitable manner. The importance of skillful human relations in a modern business environment is well established. Even the appearance of a lack of respect for an employee can undermine your best efforts to develop a pleasant working environment. Another common mistake made by some owners is failing to accept the blame when something goes wrong. A reputation for always putting the blame on others is a management deficiency that will eventually exact a heavy toll in the form of employee unrest. Being in charge means being willing to take responsibility for whatever happens on your watch.

 

While it may not be possible to eliminate every potential profit leak in your business, careful adherence to these eight operational techniques will greatly reduce your exposure to unnecessary losses.

 

– William J. Lynott is a business writer based in Abington, Penn.  Lynott@verizon.net

 

 

 

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