Make technology work for your bottom line
By Kent McSparran
Most businesses wait until the end of the month to kick out income/loss, cash flows, balance sheet and a budget analysis. Sometimes these reports contain surprises. If you’ve ever experienced that, there’s some work to do because you should never be surprised by a monthly financial.
Monthly reports are not frequent enough to give you real-time information on your business. By getting key information more often, you’ll be able to make adjustments before it becomes too late to reverse trends.
To make this change happen, businesses need to go through a process change. Accounting will say that it takes a month to produce financial statements because the bank statements come out monthly and they have to be reconciled and so forth. These habits can be hard to break.
Generate flash reports
Technology can give businesses better, faster information. Even common bank accounts are reconciled daily online. Use your accounting software to create daily and weekly “flash reports” on key indicators. We are not talking a big report here – less than a page, say five key numbers that you identify as essential.
For larger businesses, different department managers may generate these numbers, focusing on their area of importance. For sales it might be sales volume. For production it might be inventory or average cost of product. Another manager might focus on payroll. Then the CEO receives a summary page of that information.
What to do with the data
Most entrepreneurs tend to run their businesses intuitively, relying on their own inherent institutional knowledge of their industries. In these uncertain times, it’s not enough to rely on your gut instinct. Everyone is looking for signs of the economic recovery and gut instinct isn’t enough. You need hard facts from your constant flow of information.
Be fact-based and react to information not intuition. What do the indicators predict about sales and cash flow? For operations people, the key number might be keeping payroll as a percentage of gross sales under 40 percent. For sales, it might be revenue per customer.
Be decisive. React to what the numbers are telling you. The best manager manages to both profit and cash flow. Results equal cash flow plus profitability.
Technology kicks out so much information these days that it can be confusing and mean a lot less. Your job as a leader of an organization is to distill the information available to the most important fact-based information and manage to it.
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