When was the last time you put off doing something that you said you would do? Do you drag your feet when it comes to taking certain action or completing some tasks eg. phone calls, paperwork, following up late payments by customers, making business decisions, etc.? How much is this procrastination costing you and your business?
In this article, we focus on how business owners and managers can reduce the price of procrastination in their business, and discuss how acts of managerial and employee procrastination cause cashflow and profit problems.
Causes of Procrastination
Procrastination is a behaviour, the act of putting off doing a task. Often tasks which are perceived by the doer to be more enjoyable or easier to accomplish are put ahead of those tasks which are perceived to be problematic, difficult or unpleasant. Amongst the causes of procrastination for business people are; a lack of business acumen, lack of self-esteem, fear of rejection, fear of failure, fear of trusting oneself, being a perfectionist, fear of being judged and anxiety. In turn, this leads to hesitancy on the next course of action.
One of the key signs of procrastination is when the business owner or manager delays calling their slow-paying customers and hopes the payment arrives in the post or in the bank account. They wait in hope of payment because this saves making the dreaded telephone call for the outstanding invoice. The business owner and business manager live in the fear this telephone call will cost them any future business with that customer. For example, one business owner refused to chase up late customer payments because of her limiting beliefs of “I don’t want confrontation” and “I don’t want people to judge and dislike me”. What are your beliefs around following up late payments?
The Cost of Procrastination
Some people have mastered the art of putting off doing certain tasks, despite knowing that they will be worse off for the delay. Research has shown that around 15% to 20% of adults regularly put off activities that would be better done right away; around 40% of people have experienced a financial loss as a result of procrastination; and procrastinators have higher stress levels and more severe health problems than people who act right away.
Here is a case study of one of our clients which illustrates the cost of procrastination. A business owner with three retail outlets sought help. He admitted “I am the biggest procrastinator” and kept putting off a key business decision. He calculated that this procrastination cost him $10,000 per month plus much financial and emotional stress. While he knew that, he still procrastinated about the decision. Because of his limiting belief “I need approval from other people” he procrastinated on the decision as he waited on approval. Once we helped him to address this limiting belief, he stopped procrastinating and took action. This saved him $120,000 each year, dramatically reduced his stress levels and freed up his focus and energy to grow his business.
Lack of contact for the unpaid invoice
Delaying contact for the unpaid invoice is a clear case of procrastination. For instance, if the first invoice(s) for the new customer are not followed up immediately they become past due, every subsequent payment will be late. This can lead you to lose access to your money for up to 60 days.
If you delay the customer contact for too long, you may find the customer has gone out of business. There are so many pressures on cashflow, directors’ responsibilities increasing and a lack of banking support, it is not unusual these days to find the business has closed or gone in to Administration. Make sure you follow up any outstanding invoices immediately.
Credit claims and customer enquiry
Customer credit claims generally indicate there are problems with your invoices. The problem may be prices, quantities, product types, order authorisation or invoices addressed to the wrong address and/or person. If these claims and enquiries are not processed immediately, the issue which caused the first set of problems remains and is repeated on each subsequent invoice – causing more claims.
Should these credit claim numbers build up, other employees may be taken from more productive work to fix the problems and re-invoice the customers. There is no guarantee that a problem solved, will suddenly result in payment. More than likely the payment will be delayed by another 30 to 60 days.
Furthermore, any delay in processing credit claims and enquiries, may result in some customers deciding your inefficiencies are causing costs and disruptions which they are not prepared to tolerate. On the other hand, slow-payers and fraudsters often use a constant stream of credit claims and enquiries as a deliberate ploy to slow down payments or not to pay at all. These tactics will only delay your payments further. Always ensure your invoices are accurate prior to issuing them and respond to customer queries promptly.
Time costs - “… time is money”
Procrastination costs occur in many different ways and cannot always be measured in dollars and cents. There is one cost which is indisputable however, TIME. Time costs can be measured through workload as previously mentioned. For instance, what would you rather do; work on sales or correct mistakes?
Day to day processing costs
Typically, day to day costs include Credit and/or Accounts Receivable employment costs. We suggest from 10% to 30% of all employment costs are wasted or could be eliminated through better sales processes, account maintenance, quality control emphasis and a quality customer ethos.
Finance costs caused by procrastination include: increased overdraft expenses, missed settlement discount opportunities, cashing in of investments at a reduced price to pay the bills and increased bad debts. Three Strategies to Stop Procrastinating
As you consider the above costs of procrastination to your business, here are three strategies you can use to now get motivated and stop procrastinating: 1. Keep sight of the big picture
Think about the activity you have been putting off e.g. following up late paying customers, and ask yourself: “How will following up late paying customers bring me closer to my vision and goals ?” Perhaps you needed to see how this fitted into the big picture before you were motivated enough to complete this activity. When we do things without a big picture context, we can feel unmotivated, see no real reason or benefit for doing it. Therefore, we become easily distracted and procrastinate.
Once you are clear about the big picture; then ensure that you have clear goals with clear commitments and timeframes to help you to complete that activity. Research at Hofstra University demonstrates that procrastinators who had clear intentions and specific commitments to a time were eight times as likely to follow through on the commitment than those without them.
2. Are you sufficiently motivated?
As you think about the activity that you have been putting off, how motivated do you feel about doing it? Motivation is a feeling, so do you actually feel motivated as you think about for example, following up late paying customers or not? Do you feel other positive emotions (eg. confidence, passion, determination, etc.) or negative emotions (eg. resentment, guilt, shame, anger, etc) as you think about doing it?
It is difficult to put off doing things that you feel motivated to do. To get into a motivated frame of mind, think about any event in the past when you felt really motivated. As you think about that event, you will notice that you feel motivated. This is because all our thoughts are linked to feelings so any time we think about something that motivates us, we feel motivated. Once you are in the motivated frame of mind, you will find it easier to get started on any activity, and this even includes following up late paying customers.
3. What meaning do you give it?
What meaning do you give to the activity that you have been putting off? Do you imagine following up late paying customers as an example, as being boring or productive? Do you imagine that it will take forever or be quick? Do you imagine that you will be able to do it easily or do you worry that your customer will get upset with you? If you imagine positives around that activity, you will be more motivated than if you imagine the negatives.
For some procrastinators, anticipation of the task is often far worse than what the task turns out to be. Are you anticipating the task turning out well or not? By visualising the activity being a success, you will be much more motivated to take action.
There is a price to pay for acts of managerial and employee procrastination. Once you implement the above strategies, overcome your limiting beliefs and end the procrastination process, you will notice the difference to your bottom line and your business will grow.
Kim Radok is the founder and managing director of Credit Matters Pty Ltd. Kim is passionate about helping business people protect their business from other people who would steal the owner’s assets through slow-payment and fraud. Kim is a Certified Credit Executive, Certified Fraud Investigator and a Certified Adult Trainer and Educator. He brings nearly forty years of hands on experience, training, academic studies, writing and entrepreneurial business interests to every business conversation. www.creditmatters.com.au
Dr. Vesna Grubacevic is the Founding Director and Performance Transformation Expert® with award-winning company, Qt. She is an author, speaker, the creator of breakthrough behavioural change techniques, holds a PhD, a BEc and has over 30 years’ business experience, including working directly with CEOs, senior executives and their teams to assist them to create exceptional results.