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You Say You Have Awesome Service…Does it Show Up on The Phone?

**The following blog is a re-print of one I wrote in early 2019. I believe it is more relevant now than ever.**

Every single touch point in your business is an opportunity to wow, or not, your customers…

In a competitive business world, (when is it ever not?), often the only way to rise above the crowd and risk being a tall poppy is through awesome service.

Yes, all businesses must DO great work, yet how they deliver that work, the way they present it to you, if you will, is the fulcrum point, the centre of gravity on which all else rests in your business.

In fact, I would assert – because how you do one thing is how you do everything – that awesome service practiced with rigorous performance standards will elevate the technical work of your business.

Said another way, if you have extraordinary service in, say a restaurant, with hyper-clean bathrooms, tables, floors, and so on, then it is unlikely you will walk in the kitchen and see a dirty mess.

How You Do One Thing is How You Do Everything

How you do one thing – clean bathrooms – is how you do everything.

This translates to the phone…

How you talk to your Team on the phone is likely how you are with your clients.

Or is it?

Are you gruff, abrupt, curt with Team members, and gushy and sweet with customers when they call?

Ok, better hope your customers are not listening when you are on an internal call then.

I am really surprised at how few businesses get that the phone is one of the most frequent contact points for your business, especially in today’s virtual world, where it is often the only point of contact.

What happens when you call your own business?

Is the phone answered on the second ring? (First ring is too abrupt for most, on the 3rd ring impatience is kicking in…)

If not, why not?

How is someone greeted on the phone when a customer/prospect calls?

Do you have a script? “Good afternoon/morning, ABC Company, this is Mary Jones, how may I help you?”

How does the call end?

On a high? Do you say, something like, “thank you for calling, have a wonderful day!”

Who hangs up first?

Always hang up last. Why? For that one out of five times where the customer says, “oh, one more thing!”. And you are right there waiting for them…

Also, better that you get the hang-up clunk in your ear, than them. Again, always leave them on a high.

Customers in the Store Versus on Phone

People in line at your store take precedence over people just phoning, right?

Wrong.

Let’s say you are a computer store selling high-end computer systems, and some parts too.

The fellow in your store is looking for a $6 USB cable, and wants to know all the different makes and sizes, and after spending 30 minutes with your sales clerk decides to leave and order on Amazon for $4!

Meanwhile the clerk ignored the phone (person hung up after 12 rings, which shows amazing patience, most of us will hang up after 3-4 rings). The person on the phone was interested in talking about a high-end computer system for her business that she was budgeting $50,000 for and had a few questions to ask before coming in.

I admit my example is extreme, yet I bet most of you reading this have had similar experiences of calling to ask about a high-end, expensive item (maybe to find out if it is in stock), only to be treated with total indifference on the phone! Perhaps ignored completely or left on hold while they serve the “real” customers at the till.

Ok, so what happens if your Team is serving customers in the store and the phone rings?

Easy, you look the person in the eye you are serving and ask if they mind if you take that call and you will only be 30 seconds.

You take the call, answer with a grin and a script, “good afternoon, ABC Company, this is John Smith, how may I help you…”

Then very quickly say this, “I am just finishing serving a customer in the store, would you mind if I place you on hold for a brief 1-2 minutes?”

Buzz for help if you can, or quickly serve the customer and get back to the phone.

You may need to hire more people if you get a lot of calls, or walk-ins to deal with this if it persists.

Poor Service in Stores

In many stores these days the service is so bad that you don’t get service either on-the-phone or in-the-store!

A couple of weeks ago I came back to Vancouver from Salt Spring Island, and I usually am very careful when I pack up my laptop, second monitor and all the little cords that join it all together in road-warrior fashion.

This time I forgot one small simple cord.

No problem, I will go to Staples and see if they have one – good service from the young man in the electronics section, but no such animal in the store.

Ok, no problem let’s try 2 other well known big box retailers (I won’t mention who). Nope, no cord, no service, no care.

So, after spending hours really trying to buy local, I went home and late Saturday ordered the item on Amazon (for 25% the price), and it was delivered to my door on Monday at noon!

In fact, at one retailer (a big one too) there is just no one on the floor to serve people. No one. I even asked a customer who looked like he worked there for help.

One clerk I finally found was stocking shelves and with total indifference barely even pointed the approximate direction of the item I was looking for. He mumbled the aisle number and I had to ask him to repeat it. He looked annoyed that I had actually interrupted his real work of stocking shelves.

And, people wonder why Amazon has gotten so big.

Perceived Indifference

You see, perceived indifference is the number 1 reason (for 7 out of 10 people) why people stop doing business with a company.

Coming back to the phone…

That is how you can show perceived care. How you answer and handle each step in the phone call.

At our firm we have 8 Performance Standards just for the phone…

Thanks for reading….

 

 

How to Use Automation to Speed Up Your Quote/Invoicing Workflows

We use ApprovalMax software for many of our clients to route supplier bills to various Department heads to approve those bills.

An audit report with a time stamp gets attached to each bill showing when and who approved each bill. The approved bills are now ready to be paid.

Now, ApprovalMax has added Sales Quotes and Invoicing workflows to its cutting-edge software.

Here is the basic workflow…

Number 1 – Create Quotes

Inside the ApprovalMax software you can create a quote for your customers/clients.

Templates can be used to speed up the Quote Creation process.

By using pre-defined templates, the creation of the Quote will take less time.

Number 2 – Approve Quotes

The created Quote will now be routed automatically to an Approver in your company.

The Approver can check the quote for accuracy, completeness, and whether any discounts apply.

This will add an Audit Report to your quote to ensure that you have a complete Audit Trail in case there are questions or disputes later.

Next, you can…

Number 3 – Send Quotes

You can send the Approved Quote from Step 2 above to be emailed directly to your client.

There is no need to email the quote yourself. ApprovalMax will take care of this step automatically.

The software will also attach any documents to it that you want your client to see.

The final step is…

Number 4 – Accept Quotes

Now, your customer or client can accept (or reject) your quote automatically.

You will get instant notification when they do!

This allows your Sales Team to track the status of quotes and follow-up on them.

Now that your customer has automatically received and approved a quote you can also speed up the invoicing process.

Here is a typical workflow for invoicing…

Number 1 – Create Invoices

You can now instantly turn your accepted quote above into a sales invoice, using all the details you setup in the Quote.

This will reduce errors because you are not re-keying in the details into an invoice template.

By getting your invoices out more quickly and accurately, you will speed up the turnaround process of converting your accounts receivable into cash.

The next step is…

Number 2 – Approve Invoices

The created invoice can now be sent to an approver (Sales manager, or department head for example) to approve the invoice.

Number 3 – Send Invoices

The approved invoice is sent right away to your customer from ApprovalMax.

By eliminating endless back and forth emails during the invoicing stage and trying to match up the quote with the details on the invoice, you will speed up your cash conversion cycle.

Here is a summary of the benefits of using ApprovalMax for your Quoting and Invoicing processes…

Summary of Benefits
  • No more back-and-forth manual approvals via email. Everything stays in one place with Audit Reports attached to each transaction.
  • Speed up your approvals. By sending quotes and invoices directly from ApprovalMax everything will flow much faster.
  • You will reduce errors. Having someone approve each quote (it also can be more than one set of eyes by the way) this will reduce errors. Also, by creating invoices from quotes you will be able to avoid duplicate entries.
  • Get a full picture of your Accounts Receivable at each point in time – who has created a quote/invoice, who has approved it, and what pending approvals are out there for quotes.
  • Protect your business. You will be able to confirm and approve details of the job such as service availability and delivery dates when you bill customers. You further protect your business by having an audit trail of approved quotes both internally and by your customers/clients.

Finally, there is no duplication using ApprovalMax as all quotes and invoices are synced back to Xero for managing payments on account and bank reconciliations.

Thank you for reading…

 

 

Critical Ratios You Must Track in Your Business for Success – Part 3

Over the last two weeks I wrote about how the three main financial statements of your business contain five sections as follows:

  1. Assets (the things you own)
  2. Liabilities (what you owe)
  3. Equity (what’s leftover for you)

(the above 3 sections are on the Balance Sheet)

  1. Revenues (the inflows into your business)
  2. Expenses (the outflows from your business)

(the above 2 sections are on your Income Statement)

To understand the story of your business month by month, year by year you need a sharper focus.

That sharper focus can begin with ratios.

Two weeks ago I wrote about liquidity ratios and profitability ratios.

Last week I wrote about Activity Ratios, namely Average Days Inventory, Average Days Receivable, Average Days Payable, and Cash Conversion Cycle.

This week I will write about…

Leverage Ratios

Leverage ratios measure the overall debt level of a business.

It is an indication of the business’s ability to repay new and existing loans.

A very low ratio can indicate a very cautious business that may be missing out on growth opportunities.

On the other hand, in a tough economy, too much debt can cripple your ability to repay your debt.

When interest rates are very low debt can be seductive, almost like an offer of free money.

However, when they go up, unless you have a highly profitable business and excellent cash-flow the interest expense alone can cause severe financial distress.

The way to manage your debt is to create a Forecast that looks at what could happen if rates climb and create scenarios for that possibility.

The other thing to do is to lock your loans into the longest term possible with a fixed rate of interest.

Here are two examples of leverage ratios…

Debt to Equity Ratio

This is a very simple ratio, calculated as follows:

Total liabilities divided by total shareholder’s equity.

A high ratio will indicate a business that is highly debt dependent and may have challenges getting additional loans if the economy is in a recession.

Bankers will look at a low ratio as being favorable to issue new loans. They will see that the shareholders have financed most of the assets.

Another leverage ratio is…

Debt to Asset Ratio

This ratio will indicate the proportion of assets financed by debt.

A ratio of greater than one will be an indicator that most of the assets are financed by debt.

The above two ratios indicate how much your business is at risk of economic downturns and increasing interest rates.

The next ratio will tell you how much profit you have to service your debt…

Debt Service Coverage Ratio

A high debt service coverage ratio tells you how much you have to cover your interest and principal debt payments.

First, you need to determine your EBITDA. This stands for Earnings Before Interest, Taxes, Depreciation and Amortization.

You take your EBITDA and divide it by your total interest and principal payments.

A high ratio here is preferable.

It will indicate that you have a lot of coverage to pay your financial obligations.

In Summary

Bankers will look at your leverage ratios closely to determine if you qualify for new loans.

Overall, the four sets of ratios we covered in these past three weeks tell you a story about your business that just looking at the main five sections will not.

Your profitability ratios will tell you how profitable your business is, and whether you are charging enough for your products and services. It will tell you how efficient you are in managing your business resources to generate a profit.

Your liquidity ratios will inform you of your ability to pay your obligations as they become due.

Your activity ratios will tell you two things:

  1. How well you are managing your working capital – cash, accounts receivable and inventory.
  2. How quickly you convert your working capital assets into cash.

Your leverage ratios will tell you and your banker how leveraged you are, and whether you have more than enough to cover your interest and principal payments.

Thanks for reading…

Critical Ratios You Must Track in Your Business for Success – Part 2

Last week I wrote about how the three main financial statements of your business contain five sections as follows:

  1. Assets (the things you own)
  2. Liabilities (what you owe)
  3. Equity (what’s leftover for you)

(the above 3 sections are on the Balance Sheet)

  1. Revenues (the inflows into your business)
  2. Expenses (the outflows from your business)

(the above 2 sections are on your Income Statement)

To understand the story of your business month by month, year by year you need a sharper focus.

That sharper focus can begin with ratios.

Last week I wrote about liquidity ratios and profitability ratios.

To recap, liquidity ratios – the main one being your current ratio – tells you how well you are able to pay your bills as they come due.

The profitability ratios include your Gross Profit Margin, your Net Profit Margin and Return on Equity. These tell you how profitable your business is and what your return on investment is.

This week I will write about…

Activity Ratios

There are three main activity ratios:

  1. Average days inventory
  2. Average days receivable
  3. Average days payable

The above three ratios can be summarized in what is called your Cash Conversion Cycle.

The intent of the above ratios is to show you how quickly you sell your inventory, convert your accounts receivable to cash and the time you take to pay your bills in order to conserve cash.

First, let us look at…

Average Days Inventory

To calculate this ratio, you first take your opening inventory for the period (month or year) and add this to your closing inventory. Then divide by two.

Take this average and multiply by the days in the period (for example 30 or 31 for a month) and divide this by your Cost of Goods Sold for the same period.

The smaller the number the better. A smaller number means you are selling your inventory more quickly. A longer number of days means your cash is tied up in inventory.

The next ratio is….

Average Days Receivable

This measures the average number of days customers take to pay for your goods or services.

For example, if you give your customers terms of 30 days, and your days receivable are running at, say, 25 days, then you are doing great.

You calculate your days receivable as follows:

Opening Accounts Receivable at beginning of the period (month for instance) plus Closing Accounts Receivable at end of the period divided by two.

Now, take the average accounts receivable times the number of days in the period (30 or 31 for a month) and divide that number by your Revenue for that same period.

Even if you have a small number, which is great, it is important to review each aged account receivable.

This is because fast payers can bring the average down, hiding slow payers.

In a tough economy, you are only as successful as your clients are successful.

The other thing to keep in mind is that your accounts receivable is what your customers will want to stretch out as long as possible. Your account receivable is their accounts payable!

The best way to get your receivables paid fast is persistent, constant communication. The cliché “the squeaky wheel gets the grease” applies here.

A large bad debt could cripple your business.

Now, let us examine…

Average Days Payable

This is a measurement of how long you take to pay your supplier bills, on average.

For this Key Ratio, longer is better.

Why? Because it means you are holding onto your cash longer.

However, you will not want to jeopardize your relationships with your suppliers.

You calculate average days payable as follows:

Opening accounts payable plus closing accounts payable (for the period) divided by two.

Take the average as above times the number of days in the period and divide that by the Total Cost of Goods Sold for the period.

Now, we can summarize all three of the above ratios into one number…

Cash Conversion Cycle

Your cash conversion cycle is the number of days, on average, it takes to convert your working capital into cash.

Here is how you calculate this ratio:

You simply add your Average Days Inventory to your Average Days Receivable and then subtract your Average Days Payable.

Let us assume you take 60 days on average to sell your inventory, and 20 days on average to collect your receivables, and 40 days on average to pay your supplier bills.

Your Cash Conversion Cycle is 60 + 20 – 35 = 45 days.

Is it possible to have a negative Cash Conversion Cycle?

Yes!

Let us say you turn your inventory every 20 days and collect your accounts receivable in 15 days and take 40 days to pay your bills.

Your Cash Conversion Cycle will be: 20 + 15 – 40 = negative 5 days.

This is awesome, and the sign of an extremely healthy business.

Thanks for reading…

 

Critical Ratios You Must Track In Your Business For Success

Your monthly financial statements tell you a story….in the language of numbers…

Every business has three main financial statements:

  1. The Balance Sheet
  2. The Income Statement
  3. The Statement of Cash Flows

The Balance is the main statement. What? Not the Income Statement?

Yes, it is true that most businesspeople will focus most of their attention on the Income Statement.

They do this because the Income Statement shows the results of activities over a period of time – a month, a quarter, a year.

The Balance Sheet has all the information to determine the heath of a business at a specific point in time.

Did you know that the Income Statement and Statement of Cash Flows are each derived from the Balance Sheet?

The Balance Sheet is the fulcrum of the three statements.

The Big Picture

The story that your financial statements are telling you starts with the big picture.

Let us break it down…

Your Balance Sheet has three main sections:

  1. Assets
  2. Liabilities
  3. Equity

Assets are what you own.

These can be further segregated into Current Assets, Fixed Assets, and Investments and Intangible Assets.

Liabilities are what you owe.

They can be segregated into Current Liabilities (due within one year), and long-term liabilities.

The difference between your assets (what you own) and your liabilities (what you owe) is your equity.

A simple way to envision this – imagine all you own is a house. You paid $300,000. This is your asset, what you own. You have a mortgage of $210,000. This is your liability, what you owe.

Your equity is simply the difference between the two, or $90,000 in this example.

You sell your house for $300,000 and pay off your mortgage of $210,000 and you pocket $90,000.

Simple!

Your Income Statement is made up of two main sections – revenue (the inflows into your business), and expenses (the outflows from your business).

The difference between the two is your Net Profit.

Recap

So, now we have a Big Picture emerging – by knowing these five main sections of these two financial statements.

By looking at the Balance Sheet, we can determine what we own (assets), what we owe (liabilities), and the difference between the two (equity).

In examining the Income Statement, we can see what revenues flowed into our business, and what expenses flowed out of our business, and lastly how much profit we made.

That is the Big Picture…

Now let us get more detailed…and talk about ratios…

Ratio Analysis Deepens the Story

By looking at ratios in your business, we can start to interpret the “story of your business.”

Ratios come from the main sections of your financial statements. They tell us specific details about your business that we cannot glean from just looking at the five main sections…

By understanding exactly what they mean we can determine the overall health of our business.

From there we can make decisions to improve it.

What are the main ratios we should be looking at for most businesses?

Liquidity Ratios

Liquidity Ratios provide an early warning for a business unable to meet its current liabilities when they come due.

A current liability is defined as something due within one year. These include things like wages payable, accounts payable, taxes payable, and loan payments.

A current liability is paid with a current asset. Current assets are either cash in the bank or things that will convert to cash quickly. For example, accounts receivable collected and inventory when sold.

The current ratio is simply your current assets divided by your current liabilities.

One rule of thumb is that a current ratio of 2:1 or greater is extremely healthy.

A 2:1 current ratio means that for every $1 in current liabilities you have $2 in current assets to pay them. It means you are liquid.

Another way to think about it is that by being liquid you have enough current assets to pay your current liabilities as they become due.

By having $2 for every $1 in current liabilities means you are well covered.

Now let us look at…

Profitability Ratios

Three important profitability ratios are:

  1. Gross profit margin
  2. Net profit margin
  3. Return on equity.
Gross Profit Margin

Gross profit margin is the amount of profit left over after deducting your direct costs of producing or purchasing your goods and services.

Gross profit is needed to pay for your operating overhead. It needs to be high enough to cover all your overhead plus a profit.

Every industry will have a different gross profit margin percentage that will be normal in that industry.

Things that can lower your gross profit margin to a dangerous level include:

  • Sales discounting
  • Inefficient production costs
  • Venders for your purchases that are charging too much.
  • Venders delivering goods with poor quality.

Every business must measure their Gross Profit Margin by product line. In this way, you can monitor which product lines are most profitable in terms of both sales volume and the gross margin percentage.

Things that can increase your Gross Profit Margin include:

  1. Price increases especially when there is no loss in sales volume.
  2. Outsourcing manufacturing especially to a low-cost jurisdiction.
  3. Eliminating quality issues in either production in house or from your venders.

Next, we will look at…

Net Profit Margin

Every business needs to have overhead to run. These are indirect costs that are usually fixed in nature.

Some examples of overhead include:

  1. Management salaries.
  2. Rent.
  3. Insurance.
  4. Office Supplies.

Your Gross Profit must be enough to cover all of these fixed overhead expenses plus your profit.

Ways to increase your net profit include:

  1. Turn fixed expenses (as much as possible) into variable expenses.
  2. Find venders who will give you the same result for less money.
  3. Outsource as much as you are able to low-cost jurisdictions.

One of the things that happens to all businesses over time is that the fixed costs creep upward. And they also can be sticky.

By “sticky” I mean when businesses enter into longer term contracts that bind them to certain requirements that may no longer be needed.

What can happen is that you incur a fixed cost that you needed in the past, and now no longer do.

By not frequently examining your vendor relationships and agreements you may find you have fixed costs that are no longer even being used.

These can include things as expensive as office leases (more people are now working from home for instance) or software subscriptions for former employees that were not cancelled.

Now we will examine…

Return on Equity

Return on equity is expressed as a percentage of how much the business is earning in relation to its owners’ equity.

It is calculated by dividing the Net Profit by the Shareholders Equity and then multiplying this by 100 to represent it as a percentage.

A higher percentage is of course better, and a measurement of the reward being earned for the shareholders’ investment risk.

In Summary

Looking only at the larger numbers in the five main areas of your financial statements – Assets, Liabilities, Equity, Revenues, and Expenses – can be difficult to see patterns.

By expressing them as ratios, often a percentage, and understanding what they mean you can start to guide your business better.

A great accountant is someone who will interpret the numbers for you. He or she is like your co-pilot and they can help you see things that are otherwise incomprehensible.

Next week I will talk about Activity Ratios and Leverage Ratios.

Thanks for reading….