Let's face it, the most important thing in business is CASH. Cash is the oxygen of every business. When you have cash, your business can breathe. Cash enables it to survive and prosper.
While businesses can survive for a short time without growing in sales or profits, without cash it simply will not survive.
This is why the inflow and outflow of cash must be carefully watched and managed.
If you asked your employees right now, “Who generates cash in the business?”...what would they say? Would they point to the sales team or the management team? Someone else?
In reality, the employees generate and ultimately control cash in your company. Unfortunately, very few employees receive the education, information and reinforcement they need to really understand how their decisions directly impact the company’s performance.
If your company operates in an open-book fashion, it's likely you’ve taken steps to ensure your employees have access to vital financial information.
The next step is to ensure they understand the financial metrics in your business, one of the most important being cash.
Cash generation is the difference between all the cash that flows into the business and all the cash that flows out of the business. Cash flows into the business from sources like product sales and from lenders or investors. Cash flows out of the business for items like wages, materials, sales made on credit, equipment purchases, inventory and tax payments. But how do you clearly demonstrate this process to your employees?
We’ve put together a training bite (a short and simple training tool) to help you explain the concept (and importance) of cash to your employees in less than 15 minutes.
Demonstrate the flow of cash through the business and highlight the many decisions that they must make in order for the company to not only survive, but also prosper.
Using the clear two-liter soft drink bottles, write your sources of cash (i.e., sales and lenders) with a black marker on some of the bottles. Next, write the names of cash outflow items on several other bottles (i.e., COGS, receivables, expenses, bonus, capital, etc.). Fill the sales and lender bottles with colored water before starting the demonstration.
For many employees, this type of visual learning experience can help solidify not only how cash works, but also how little cash is often left in the company after costs and expenses are paid.
Educated businesspeople (regardless of what level they are at in the organization) will ask the questions:
A businessperson who fails to ask these questions will ultimately regret it.
Have you found any other creative ways to explain the importance of cash to your employees' financial literacy training? Share your ideas in the comments below!
Do you need a tool to help you figure out your cash for the next 90-days? Click ↓ for a free 60 day webinar and 90*Day Cash Tool.
More Articles You Might Like:
Financially Literate Employees Means Stronger Financial Plans