Why 47% of local companies lose liquidity due to lack of procedures
We have noticed a dangerous trend in Krakow family businesses. Almost half of them are fighting for survival because no one knows who can spend 500 PLN on an air conditioning repair without asking the boss for permission. This is not a matter of bad luck, but a lack of hard management principles that should keep finances in check.
Money escapes through cracks you don't see
In the last 8 years, we have analyzed the finances of 83 companies from the Lesser Poland region. Most of them started in a small office on Królewska St. or in private homes. When a company grows from 3 to 12 people, the old management model, where the boss personally decides everything, stops working. We noticed that 47% of these businesses lose financial liquidity not due to lack of orders, but due to total chaos in spending procedures. No one knows exactly who can order materials for 4300 PLN, and who must first obtain written consent. This is a straight path to a budget hole, which usually reveals itself at the least appropriate moment, for example, just before the social security payment deadline.
We often hear from owners that there is full trust in their team. This is a beautiful slogan for a Sunday dinner, but in hard business, trust without clear procedures is simply asking for trouble. In one transport company we collaborated with in the second quarter of 2024, drivers chose the workshops for car repairs themselves. The result? Invoices for simple oil and filter changes were 31% higher than average rates in Krakow. The company was losing nearly 2800 PLN monthly just because no one checked these costs before they were incurred. Our principle is simple: facts matter, not the promises of employees that they 'did it as cheaply as possible'.
Lack of structure is not only a loss of money, it is primarily a gigantic stress for the owner. If every five minutes someone enters your office and asks if they can buy printer paper or new tires, it means you are not managing the company, but are a slave to minor decisions. We build the foundations of your peace of mind by delegating financial powers, but in a safe and controlled manner. Every employee must know where their wallet competency ends. (By the way, most of these mistakes result from haste and lack of time to think about the system, rather than the bad will of people).
Trust without clear procedures in business is simply a risk not worth taking.
The story of one piece of paper that saved a wholesaler
In October 2023, we were asked for help by the owner of a building materials wholesaler near Balice. Mr. Andrzej had 14 employees and record turnover, but his bank account was empty every month. After 11 days of our analysis, the truth came out. Sales representatives, chasing sales plans, granted clients discounts at the level of 12-15% without any consultation with the top. There was no procedure that blocked sales below the profitability threshold. The company was turning over huge amounts, but was earning less and less net because logistics costs ate the remnants of the margin.
The solution was banally simple and cost us as much as printing one PDF file. We introduced the 'Margin Approval Sheet'. Every sales representative who wanted to lower the price by more than 4.65% had to fill in three short fields: reason for discount, planned cash margin, and client payment term. This one piece of paper made the sales reps actually negotiate instead of immediately 'giving up' the price. Previously, they did it instinctively because no one held them accountable for it. Now they had to stand before the owner and argue their decision, which radically changed their approach to the company's money.
After 47 days of implementing this simple change, the wholesaler's financial liquidity improved by 18,700 PLN per month. It wasn't magic or innovative technology, but a hard management structure. Mr. Andrzej regained control over what happens in the field, and we proved that hard structure is a certain profit. We did not look for savings in firing people, but in sealing a system that had been leaking for years. Today, this wholesaler has set aside reserve capital that allowed them to survive the winter slump in construction without taking revolving loans.
Three steps to regaining control over cash
If you feel that money in your company is disappearing into thin air, you must start by setting decision limits. At Korona Corporate Governance, we recommend the three-threshold method, which works well in small teams up to 15 people. The first threshold is expenses up to 200 PLN – here the employee decides themselves, but must bring the invoice within 24 hours. The second threshold is amounts from 200 to 1500 PLN, which require email approval from a manager. The third threshold is everything above 1500 PLN, which the owner must sign. This simple sieve stops 83% of unnecessary expenses that previously went 'under the radar'.
The next step is an audit of fixed subscriptions and services. In November 2023, we helped a small printing house from Krakow's Kazimierz district that was paying for 7 different graphics programs and marketing tools, 4 of which had not been used for over a year. A total of 640 PLN was leaking there every month. This may seem like a small amount, but on an annual scale, it gives 7680 PLN – enough to finance a proper course for an employee or replace old equipment in the office. Clearing such 'zombie costs' is the fastest way to improve the financial result without looking for new customers.
The last element is introducing payment discipline among your contractors. The lack of a debt collection procedure is a silent killer of local trade. We established with our clients that the first phone call reminding about an invoice is made 2 days after the deadline, and not after 3 weeks when we are short on salaries. In one of Krakow's grocery wholesalers, we shortened the average waiting time for a transfer from 42 to 26 days simply by consistently sticking to this schedule. Principles stronger than the crisis only work when they are applied daily, and not just when we have time to think about them.
Clearing costs that no one uses is the fastest method to improve profit.
Principles stronger than the crisis – why does it work?
Many entrepreneurs fear that procedures will kill their company's creativity and flexibility. This is erroneous thinking that most often leads to collapse during a market downturn. The truth is that procedures free the boss's head from thinking about nonsense. When you have a clear structure, your people know what to do, and you have time for strategy and building relationships with key partners. In Krakow, where the market is saturated and competition doesn't sleep, the winners are those who have the best organized internal processes, and not those who shout loudest about 'individual approach'.
The management structure we build is like a building's skeleton – it isn't visible from the outside, but it is what ensures the whole thing won't collapse in a strong wind. Analyzing data from our 156 completed projects, we see a clear correlation: companies with described spending procedures have a 23% higher resistance to sudden revenue drops. They simply know where the tap can be 'turned off' immediately and which expenses are necessary for survival. This is the hard structure and certain profit we talk about at every meeting with our business partners.
Finally, it's worth adding that tidying up a company is a process that usually lasts from 3 to 5 weeks. We don't promise that we will change your business in one day, because that would be a lie. We build the foundations of your peace of mind step by step, starting with the most urgent budget holes. If you feel you are losing control over what happens in your office on Floriańska St. or in your warehouse in Nowa Huta, it's a sign that it's time for hard rules. Facts matter, not promises that 'it will somehow be fine'. We invite you to talk about specifics, not visions.
