Measuring and monitoring business performance
As an advisor to a client base that operates across a vast array of industries it is unlikely that your accountant will be spending the time to identify and understand the impact of the leading financial and non-financial KPIs that drive your business. Yet this is critical information that a CFO would want to know.
No CFO? Then as a business owner it is assumed that you would know these like the back of your hand and be constantly measuring and reporting on them, right?
If not you may need your advisor to walk you through the discovery process and then design and develop framework that measures, analyses and reports on these indicators. That's what we do. Why?
Are you looking out the rear view mirror or the windscreen?
Differentiating between leading and lagging indicators is crucial if you want to impact change in your business. The P&L, Balance Sheet or Cashflow statement provide an image of what has transpired but by that point the die is cast. These reports are a measurement tool. What impacts business performance is your ability to impact leading indicators. Hollywood stunt drivers aside, it is a hell of a lot easier driving a car when looking out of the windscreen.
Is it only financial indicators that impact your business performance?
The majority of business owners look solely at financial indicators for understanding and implementing business growth. Yes they can be important, but they are not the only critical driver of business performance. If you pared it back what are the most critical drivers to business performance and success in your business? Does customer satisfaction, average delivery/service time, wastage, product range and sell through, employee turnover, warranty returns impact your business performance?
Non-financial indicators can often be the most important drivers, but equally the most difficult to measure, monitor and therefore improve. Effecting positive changes in these drivers can have a massive financial impact on cash flow and equity growth.
Until you spend the time to understand the key drivers of profit, cash & equity growth then a business owner is flying blind regarding how to influence and impact their business. That might be fine when times are good, but if the pendulum swings then the business quickly becomes a rudderless ship. Careful, the pendulum can swing pretty fast.
PKF Future of Choice advisory services includes structured and methodical processes that show business owners that they can drive their business more effectively by looking out the windscreen. Leave the crazy stuff to the movie screens.