As Christians, whether we are business owners or dealing with household income, we need to understand that we are managing God’s money.
One of the most powerful ways of reducing expenses in a business is by switching from credit to cash.
I learned this lesson through one of my businesses, a small boutique hotel. When I took over the business, it was really struggling. I managed to increase the occupancy and revenue from rooms increased substantially. However, I really struggled with the restaurant as expenses had run out of all control. To be profitable, we had to work on a 65% Gross Profit (GP). In other words, for every $1,000 the restaurant earned, we had to spend no more than $350.00 on raw materials (i.e. stock).
Somehow, my team was unable to achieve this. They couldn’t even come close. Each month, I would check sales, then I would look at my invoices from suppliers, only to find that the staff had purchased $700.00 or more for every $1,000 in sales. In some months they were somehow able to spend everything we had earned and in one instance, they even spent more than we earned for the month!
Managing God’s Money
This caused me no end of stress. Apart from the financial losses I was incurring, as a Christian business owner, I was painfully aware that I was mismanaging God’s money.
I tried everything. Regular stock-takes, inventory control systems, reporting systems, monitoring, management sign-off on all purchases. Nothing helped. Instead, I found myself slowly going out of business.
In desperation, I contacted my suppliers and explained the situation. I had racked up huge bills on my accounts and simply did not have the funds with which to pay them.
I switched all of my accounts to Cash on Delivery (COD) and made arrangements to pay off the arrears on outstanding accounts. I then sat down with my hotel manager and restaurant staff.
Based on average sales over the past several months plus pre-booked events we were able to predict, with reasonable accuracy, how many people we could expect through the restaurant in any given week and how much those customers were likely to spend. Based on that prediction, I could calculate our estimated revenue for the week and, by extension, roughly how much we should be spending on stock.
I drew this money in cash and told the staff that this was what they had to spend for the week so they should spend it wisely. All suppliers would expect to be paid in cash for any stock they delivered going forward. Any additional funds would need to be specifically requested and authorized before placing further orders.
It was my hope that this would bring some sort of improvement over time.
In fact, within one week of implementing this new strategy, the kitchen was suddenly able to meet its target budget and consistently managed to do so almost every week after that. What changed? Had staff members been stealing stock before? Possibly. However, all the systems were already in place to identify and prevent theft before I implemented this strategy so this was unlikely.
In fact, I had previously caught staff members who were stealing and already dealt with that situation. Yet, the massive expenses continued. Right up to the moment we implemented a cash-based payment system. I believe the problem was less sinister than that. The fact is, when people had the freedom to spend without giving any real thought to how and when their purchases were paid for, they did just that.
Giving the buyers a fixed amount of cash each week and designating them the responsibility of managing that cash forced them to consider their purchases more carefully. They put more thought into ordering, taking advantage of special offers when they came up and only buying what they absolutely needed in any given week rather than making those extra ‘convenience’ purchases they had been making previously.
The result was, of course, less stock in the store rooms which resulted in more frugal use of the stock on hand. Instead of over-catering and creating reams of waste which then got thrown in the bin each day, the kitchen staff was forced to be more careful to ensure that they only used what was actually needed. The net result? The restaurant immediately became more profitable and within a few months, I was able to pay off all of my outstanding supplier accounts.
On consideration, I realized that my family expenses were also unnecessarily high. As I had done in my business, I needed to become better at managing God’s money in my personal life.
By way of experiment, my wife and I decided to apply this same rule in our personal lives. Instead of spending on our credit and debit cards without any thought about funds, we began drawing cash on a weekly basis for our family budget.
Having gone through our accounts and calculated what we actually needed, we set ourselves a weekly budget and drew that amount in cash at the beginning of each week. If the money ran out, any additional purchases would have to wait until the following week.
To our surprise, the same thing happened when managing God’s money in our personal lives as had happened in my business. It was amazing to realize how often we didn’t even spend all of our allocated weekly budget. Again, nothing else had changed. We had carefully assessed our weekly budget and ensured that we only included essentials in that calculation.
Yet, when spending cash on hand, we ended up with change at the end of each week. Instead of squandering this, we simply deducted any money left over from the next week’s drawings. Net result? All the money saved on shopping each week began to build up as savings in our bank account.