Carrot vs Payout
A prospect client came to see me yesterday on his intended Staff Incentive Program.
He was all ready and excited to present his Program.
He was all focused on Sales and Profits as “KPI”, and he wanted to do away with annual appraisal and annual bonus payout. Instead, he was proposing a quarterly appraisal and quarterly payout.
I then asked him 3 questions :
1. How accurate are your Monthly Financial Statements ? (i.e. completeness of documents, existence of Consistent Accounting policies like Revenue Recognition and Cost-Matching policies to ensure correct margins to be captured monthly, etc)
2. Do you have monthly Loan Repayments?
3. Are your Customers paying you promptly?
His replies were :
1. Current Bookkeeping and Financial Statements need much improvement.
2. There is indeed a Monthly Loan repayment commitment, whose amount is higher than his “cash profit KPI”
3. Customers have never been prompt in their payments.
After replying my 3 questions with his 3 Answers, he suddenly knew what he should do.
He then asked me how do we charge for our accounting service.
He realized the importance of using numbers to “Talk” business and make decisions.
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