3 Solutions to Balancing Incentives and Cash Flow

This time, we would like to share 3 solutions to balancing incentives and cashflow knowing that small business owners are passionate about their business. Money is often not the driving force for why they do what they do. So, when some employees expect incentives or bonuses on top of their base salary it can feel a little yuck. But these reward strategies can be amazingly successful and help drive your business forward.

However, be warned. Anyone who tells you that they have developed the perfect incentive plan, hasn’t shared it with their team yet. There will be some of their team members who will look for ways to maximise their earnings from the plan. Having the right Terms and Conditions clearly documented is essential to protect your business.

Horror Story 1:

The incentive plan rewarded employees for top line revenue achieved in a month. Employees would push to close deals to achieve their target and stretch target numbers. Clients had a 14 day “cool down” window to change their minds and would regularly call to cancel deals that had been made in high pressure sales. Yet, the business owner was paying incentives for those cancelled deals and rapidly heading towards bankruptcy.

Solution 1:

Ensure your incentive plan and your Client terms and conditions line up. If the clients can cancel, ensure that there is a claw back process or that the incentive is calculated once payments have been received.

Horror Story 2:

An underperforming employee is part of a very successful team. The rest of the team are becoming resentful that the employee is taking a share of the bonus pool when they have not met the expectations of the role.

Solution 2:

Ensure your incentive plan has a way to limit or withhold payments to team members who are not achieving their goals and are formally in performance management.

Horror Story 3:

A great employee was on Maternity leave when an amazing deal was started and won. The incentive plan was Team level and based on deals closed. The employee rang the owner after the incentive payment date requesting her portion. As the employer had already divided the incentive between the rest of the team, they needed to pay an additional share from the project income, which impacted profitability.

Solution 3:

Ensure your incentive plan has terms which limit the amounts paid to people on long term paid or unpaid leave. Also ensure you have an offset clause for adjustments.

Impact HR offers incentive plan reviews. If you would like your incentive plans reviewed, please reach out. We are here to help you have your dream team and your dream business. Call us on 1300 474 672 or book a meeting today.