You may have heard this saying before:
“If the alligators are biting it’s too late to drain the swamp.”
Keep this in mind while running your business. Doing so can affect not only profitability but also your very survival.
Here are a few examples of when the alligators start biting:
1. Consider the sales manager who is not producing what you’ve come to expect from him; you notice a decline in sales and even a disruption to the team. He should either be refocused or fired. Now your revenue and profits are down. If he handled your largest accounts and the competition has now stolen them from your company, you’ve been bit by alligators.
2. Your CFO is constantly late with financial statements, and the bank is growing concerned. You then discover after months of frustration that he has personal problems that have affected his performance. Now the bank is concerned about your ability to run your business. You’ve been bit by alligators.
3. The classic survival story involves fraud. Almost half – thats 50% – of our clients have encountered some kind of fraudulent situation. When the CFO/controller has been systematically stealing, the bank’s knee-jerk reaction can leave you scrambling to find another bank. That’s not so easy in this economic climate. You’ve been bit by alligators, and your company may be devoured.
The key here is to put safe guards in place with the assistance of your auditors. Don’t let the CFO set the testing limits above the limit he’s stealing. Let your auditors run the process. Also, as the CEO or key manager, you should periodically sign every check for a month that would normally be a “one signature” check handled by the CFO/Controller. This control is one great way to start draining the swamp.
How to Avoid Being Bitten by Alligators?
Be proactive instead of reactive. Drain the swamp before the alligators take up residence and start chomping.
As your company grows and you start delegating work, make sure that you keep yourself embedded in enough of the processes to have proper control. Don’t delegate and forget.
If you have auditing processes, don’t stick to limitations (e.g. we’ll look at all transactions over $5000). Mix things up and be unpredictable, so that no one can take advantage of your complacency or your routines.
Ask a lot of questions of your key people. Learn about your cash flow, your payables, and your company’s projections. Don’t believe what you’re told. Follow up on the details and have an auditor check out those projections. That’s prudent business practice.
I’m not suggesting that you don’t trust your CFO or that you don’t believe anyone. I’m just saying you need to question what’s happening and check up on things for yourself.
This may not be draining the swamp, but it is keeping the water level down. This is being proactive – not reactive – and it will always cost you less time and money.
Until next time, don’t get bit by the alligators.