Executive Summary: Develop behavioral cost controls in your employees by incubating a need versus want mentality on purchases.
The ATM perception. Things look great – you own the company and your last name is on the side of excavators and dump trucks all over town. The guys in the field think the company can afford anything – and that perception flows over into all purchases from the foreman buying another hard hat at the safety store (because his favorite laborer just can’t remember to bring his in from the house every morning) to your superintendent wanting to buy the new backhoe with all the bells and whistles.
Developing a behavior. Developing cost control as a mindset will serve the company well in minimizing unnecessary purchases. As the owner if you do not have the fanciest company vehicle, don’t have the fanciest chair, and don’t have the three largest monitors all sitting in your office, it becomes pretty easy to say “if I own the company and I don’t have one, you shouldn’t have one either”. Employees don’t like to continually hear that we’re buying the generic brand coffee, only allowing black and white copies to be made without the special copier code, and buying the backhoe without the enclosed cab and new stereo, but it sounds much better than “we can’t bid that job because we don’t have the bonding capacity because we’re low on cash.” Cost savings is a mantra best exhibited from the top, and wise spending by top executives will help the job and company profit and loss statements.
My story. I used to remind my superintendent that I didn’t have a cash orchard out back (ie, a grove of trees growing $20 bill leaves), nor an ATM machine in the front lobby spitting out hundreds. He was always conscious about cost and cash flow, but he wasn’t afraid to ask for things he thought the company needed. With every significant purchase I was always able to bring it to an immediate crossroads for the inquiring party, whether it was a backhoe purchase or a new computer mouse:
Is this a need or a want?
We have cash for needs, not for wants. We need an excavator to dig, so you get one with a bucket. Ok. The new stereo system in the enclosed cab is a want. No.