Compensation management, cash flow villain.

A very important topic in business management that I have followed for many years is determining the fair value of partner compensation. This point deserves a lot of attention and should be approached with great caution, since some owners cannot separate an individual from a legal entity, that is, personal expenses and income from company expenses.

As you know, we cannot get what we want, but what the company can afford. In other words, fair value so that the finances remain healthy and the company continues to meet all its financial obligations without compromising the company's cash flows.

For effective management that allows you to maintain the financial health of your business, we must not underestimate the impact that personal withdrawals of partners have on business in general and, in particular, on the company's cash flow.

We need to realize that finance is the backbone of every business, so it supports the long life of the company and thus the creation of jobs, income for the state, and profit for partners and shareholders in the end. ... This is the goal of any company.

As a rule, we know that companies, offering goods and services, are the engine of the economy of a certain region, and why not, of the entire country. Therefore, we say that finance is this foundation, a foundation that by itself is not capable of creating new business, and that is why we need to build the pillars, which are employees, through the marketing, sales and support sectors. , technology, etc. Since everyone will always be associated with financial activities, that is, the basis of business. Here you can see the best Veterinary Software.

Currently, the majority of entrepreneurs who own micro and small businesses do not practice such a division into an individual and a legal entity. They often do not realize the importance of this.

In the following, I'll cover three options for rewarding partners and better explain what each form of reward represents for the business.

The salary of partners should consist of three forms of remuneration:

1) Remuneration for activities

Occurs when a partner completes operational business tasks.

Example. A veterinary clinic whose partner is a veterinarian who also advises and performs surgeries, for this reason receiving consultations, which he conducts, like other veterinarians in the clinic.

Performance rewards show the rest of the company that the partner receives a salary that is identical to that of any other employee performing a specific function, thereby creating a sense of equality in the team.

For the partner, completing operational tasks provides closeness to the customer and, accordingly, a better understanding of how to service them, how much inventory is required, what are the main complaints, etc. work, we should not forget that he is the manager of the company and, immersed in daily life, he may not be able to achieve good results. management, so it is necessary to balance the roles.

2) Compensation to members

A fixed amount paid to a partner per month if he works for the company. This value must be fair to the company and fair to the market. It is determined by the cost of the work, not by how much the partner would like to earn. A good way to find fair value is to ask: How much would you pay a person to do this?

This amount should be fair compensation and not an amount to meet the personal financial needs of the participant. For example, a partner performing managerial tasks must have a certain remuneration in accordance with the amount that the company will cost to hire a manager.

3) Profit sharing

At the end of each month or a certain period (quarter, semester, year), the partners of the company must calculate how much profit the company has brought. This information is extremely important as it will determine if the business is going well, and if not, what changes will be required to get the company on track. The amount calculated as profit can (and should) be distributed among partners. It is always important to determine in advance what the rules for this allocation are:

How often will the distribution take place?

What part of each partner - whether it will be done according to the corporate distribution (quotas) or not;

Whether or not there will be a percentage of this profit (or a fixed amount) that will remain in the company as a reserve or even for investment;

Earnings forecasting rules, etc.

Thus, the partner's salary will be equal to the sum of these three awards. And if the partner does not work in the business, he will only have distribution.