By Diane M. Calabrese / Published July 2015
Protocols hold things together. They clarify the rules. They simplify communication. Distributors and manufacturers establish protocols to facilitate in-house activities and to be prepared for any external review, whether it is expected (hired auditor) or unanticipated (regulators). It is possible to develop guidelines for handling equipment, chemicals, financial transactions, and all other dimensions of a business that fall under the umbrella of safety without help from an outside consultant or the assistance of regulators. However, many distributors and manufacturers choose to get
Often, the approach to developing and maintaining protocols involves both in-house and outside expertise. “It really depends,” says Brenda Purs-well, president of Alklean Industries, Inc. in Pasadena, TX. “For instance, on MSDS and SDS, we use a third party. We depend on them to notify us if there are huge changes.” For safety training on forklifts, it’s a combination of approaches, explains Purswell. A training video developed by an
outside group is used to instruct employees in safe forklift use.
Irrespective of how safety protocols are established and kept up-to-date, it is the responsibility of the business owner to document they are followed. “For us, when we hire a new employee, we make sure they go through safety training,” says Purswell.
Moreover, safety is not something that merits attention only after a business begins to take root. “An owner must be thinking about it right from the inception of a business,” says Purswell. Distributors and manufacturers of all sizes are subject to regulations. “The law affects everybody, not just big distributors,” says Purswell.
Small companies cannot assume that because they have fewer trucks on the road they are less likely to be stopped for a random inspection. And, at some point, all trucks will have to pass through an inspection station in most states. Being prepared by following protocols ensures that if an inspection does occur, there will not be a problem. Everything will be labeled as it should be. Truck parts from lights to tires will be in working order and good condition and so on.
Protocols protect a distributor or manufacturer should an incident occur. Being able to demonstrate that an employee was properly trained in the use of equipment is important in such a scenario.
As for an employer’s responsibility, if there is a workplace incident, the rules for reporting are complex. They depend on the type of industrial classification applied to a particular distributor or manufacturer. Rules also change with the size of the employer.
The thicket of reporting requirements is another good reason for tying into outside help. The outside help could be in the form of a consultant, updates from regulatory agencies (sign up for the updates via e-mail at the agency websites), or from professional organizations such as the Cleaning Equipment Trade Association (CETA).
To illustrate the difficulty of staying current in all regulations, we offer one recent example of a change in reporting requirements. As all readers know, the Occupational Safety and Health Administration (OSHA) has detailed requirements for reporting work-related injuries and illnesses. (See 29 CFR Part 1904.)
On January 1, 2015, the final rule on Occupational Injury and Illness Reporting Requirements—NAICS and Reporting Revisions became effective. [NAICS is the North American Industry Classification System that supplants the Standard Industrial Classification (SIC). The rule still includes SIC codes in an appendix, as in reality both classification systems are still in use.]
Under the revised reporting rule, some employers are partially exempt from keeping records of work-related injuries or illnesses. They receive the exemption because they have relatively low rates of occupational injury or illness. (By definition, they have a lost workday injury and illness rate that is at or below 75 percent of the three-year average for incidents in private industry.) Most distributors and manufacturers will not be exempt.
In any case, under the final rule, all work-related, in-patient hospitalizations (and certain other events, such as amputations and eye loss) must be reported to OSHA within 24 hours of an event. Fatalities and hospitalizations involving three or more employees must be reported within eight hours.
Background checks on employees, a firm knowledge of the creditworthiness of buyers, secure bank accounts, and protection of all financial information are just some of the dimensions of financial safety. Compliance with licensing, regulations, and taxes are among the others.
Simply determining tax obligations has become an enormous task, especially for companies that sell in many states. Help is available from the entities (local, state, and federal) that levy taxes and fees, as well as from consultants. An accountant on the employee roster may still need to seek outside advice as rules change.
The time saved by having excellent financial protocols in place proves invaluable when there are changes in financial reporting requirements. In that context, Gregg Brodsky, the senior western sales manager at Alkota Cleaning Systems, Inc., in Alcester, SD, emphasizes the utility of the sixth generation benchmarking, or Planning for Profit survey, available to CETA members. By committing to benchmarking, a distributor or manufacturer is also committing to operating with a plan.
If there are accounting issues, for example, benchmarking will make them apparent. A chart of accounts should be set up correctly. Inventory items and costing should be up-to-date. Depreciation and expense accounts should be separated and current. Revenue accounts should be separated. Too often, says Brodsky, he sees just the opposite in his travels.
“Concentrating on selling more products without tracking and measuring performance is futile,” says Brodsky. “A good question to start with is “how would your business assess its financial strength?” Are your accounting protocols and information input correct? Do you have at your fingertips the ability to visualize the financial skeleton of your business’s economic foundation? No doubt, most would make the mistake of exclusively referring to the income statement and bank account while ignoring the most powerful financial tools in the accounting arsenal: the balance sheet and the cash flow statement.”
The most comprehensive financial view of any business derives from looking at income (or profit and loss), the balance sheet, and the cash flow statement in conjunction with one another, explains Brodsky. He sees the three components as part of a financial triangle for business success.
“The income statement, or first line of the financial triangle of success, will not show the overall economic position, but can be viewed as a general report card breaking down revenue and expense streams for review while showing gross and net profit over a given period of time,” explains Brodsky. Net profit is not, however, immediately available for distribution, expansion, or to finance future growth.
It is the second line of the triangle, the balance sheet, that gives a pictorial representation of the general financial condition of a business on a given date, explains Brodsky. It indicates the potential for financing growth.
The third line of the triangle is the cash flow statement. Brodsky likens the fluctuations in cash flow to the changes in a river. It’s possible to be profitable and still have cash flow issues.
Cash flow is—and always has been—one of the most challenging facets of business, says Brodsky. Putting cash flow in context fortifies financial protocols and keeps a business on safe footing.