Electrical Connection Autumn 2016

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E L E C T R I C A L CO N N E C T I O N A U T UMN 2 0 16 8 7
administration could be against
percentage of invoices sent out within a
set period, bonus for collections under
14 days, etc.
2. Pick the department that is going to
give you the highest result for your
effort; for example, if you manufacture
pick production, if you are a re-seller
then sales is your area and if cash
flow is a challenge then it could be a
combination of the sales and finance
departments for collecting the money
on time.
3. Develop a bonus system on paper first
ensuring you have factored in your
costs. Most bonus systems fall down
because the employees over perform
and the business can’t afford to pay
the bonus.
4. Model the bonus system on a spread
sheet using the wages, bonus and
costs as the key figures to check.
If you are working on units and the
current situation is 100 units produced
each week then you need to test
the bonus on what happens if they
produce 300 units or 500 units. How
does this affect your costs – do you
have to employ more people to keep
up with the work? Do you have to move
premises, etc?
5. Build in quality if you are working on an
increase of units.
6. Once you are happy with the bonus
structure and have tested it on paper
and on your computer then you will
need to meet with your employees,
discuss the bonus system, discuss how
it will work and that it will be tested and
some adjustments may be necessary.
7. Test it, cost it so you know you are
making a profit.
DANGER POINT
Do not put in a bonus system and
then take it out as employees will
become unmotivated and your business
will suffer. A bonus system needs to
be well structured prior to it being
implemented.
Make sure you cost the bonus system
in terms of extra wages compared to
profit and productivity and you have
the cash flow to pay it. If you are paid
on 30-45 day accounts by your clients/
customers and you pay wages every
week then a good bonus system could
send you profit rich and cash poor.
Pay a bonus only after you receive the
cash, e.g. if you are paid by your clients
every 45 days then the bonus would be
paid quarterly.
Tony Gattari is founder and chief
energy officer of Achievers Group. He
also acts as general manager of sales
and marketing for Laser Plumbing and
Electrical membership group.
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