As individuals and businesses, during times of economic downturns and tight cash flows, we naturally fall into patterns of managing our pennies and dollars. We look to cut costs. We analyze our processes to avoid spending on “unnecessary” items and we put off doing things that can wait, are “nice to do” not “need to do,” and generally guard what cash we have. The problem then becomes our definitions of “unnecessary,” “nice to do” and “things that can wait”.
Timing and Necessity
When we look at our budgets and the expenditures we are making or plan to make, we are essentially making trade-offs. We can do option A, B and C or projects F and G. We can invest in marketing and training or we can buy a new piece of equipment or make payroll. Budgets are always about the plan we have for those trade-offs (in good times and bad; we just have more or less resources to allocate). So when it comes time to make those trade-off decisions and times are tough, tight or even desperate, it becomes harder to evaluate the options and find a balance between NOW and sometime in the future. Between getting through TODAY and framing decisions in the context of today plus the future impact.
In a recent workshop, a participant (let’s call him Jack) asked about how he could have done things differently. He was trying to work with one of his outside advisors, let’s say it was his attorney. He didn’t understand what the attorney tried to explain to him; in fact this was the third attorney the firm had provided to handle his company’s needs. Jack wasn’t sure the law firm had all the information, but “to save money” he didn’t want to meet with the new attorney and Jack didn’t want to call on another advisor whom he would also have to pay an hourly rate to oversee the project and talk with the attorney. Time was of essence on the project and budgets were tight. The attorney proceeded as Jack had directed without meeting with Jack first. Then Jack sent the attorney some more information. Then the attorney realized that a key document that Jack referred to wasn’t in the file.
So the attorney made the request for the missing document. (Now keep in mind this is the third attorney from the firm that has worked with Jack). The law firm has passed all previous correspondence from one attorney to the other, to the other. A short conversation with the latest attorney could ensure that the lawyer has everything relevant to the issue and a clear understanding of the deliverable, but being pennywise and fee foolish, Jack decides that it is less costly to not meet with the new attorney and let the work proceed.
The attorney went to work on the agreement that was needed based upon the available information. After numerous hours of working on the document, it was sent to Jack, who happily presented the agreement to the other party … only to find out it didn’t contain critical information on intellectual property rights in addition to few other items that were crucial negotiation points. Jack was irate that the attorney didn’t deal with those items appropriately, and he had a substantial invoice for an unusable document and a delay in making a deal.
Who Is Responsible for the Oversight?
In this example, who is at fault for the right information not getting into the agreement: The attorney who relied on the limited information that Jack provided, or Jack, who wouldn’t meet with the attorney to make sure the deliverable was clear and all the relevant information was provided to the attorney? The attorney? The client? Both?
When it comes down to the bottom-line the business owner is accountable for his decision to save money and not meet with the attorney to make sure there was a clear understanding of what was needed. A 30 minute investment of time spent talking to the new attorney would have ensured that the major points at least were covered…and if they weren’t them the attorney would have been accountable for the errors.
Penny and Deliverable Savvy
Sometimes to save money you have to invest money. As a business owner or an individual, you weigh the risk of investing an extra half hour, hour or several hours to make sure something is done right the first time, versus having to have it done again…and again…and again. Sometimes the investment is visible – how much you will spend to meet with the new attorney. Sometimes it is less obvious when it is utilizing the time of existing employees who are paid a salary and repeat a task over and over again until it is right.
When we look at decisions to decide what is “necessary” to do. It is important, even critical, to make sure you are looking at all the variables and the impact of not getting something right. If you are deciding whether to do something in-house or outsource, you have to consider the impact the project/activity will have on total operations, what degree of control you need to be sure it is “right”, and the total costs will you spend more time coordinating with an vendor than if you were managing the project in-house? Will quality, delivery, and other aspects differ in-house versus outsourced? Do you even know?
The impact of saving money is significant. A dollar saved is one you don’t have to earn. Avoiding costs is also a good strategy, but not at the expense of getting the right deliverable. Do it once. Do it right. Will always be a better investment than having to do a task over, and over, and over again.
Author: Lea A. Strickland, MBA CMA CFM CBM GMC
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