Remember when you started your Small Business full of enthusiasm and excitement peppered with some…
The Importance of Reviewing Your Business Numbers on a Monthly Basis
Remember your school days when you got your report card from the teachers and had to take it home to your parents, dreading what it might say and whether you’d get into trouble about something?
And then you may have started working in a job and found that there were regular performance reviews that were not too dissimilar to the report cards from your school days. One day, you decided to set up your own business, be your own boss, thinking that one of the benefits would be no more report cards on you. Alas, this isn’t the case.
As a business owner, you need to have report cards, or scorecards on your business and sometimes what’s on the scorecard can make it feel like a bad school report. These scorecards need to be produced on a monthly basis and will compare the actual results of the business against your pre-determined goals for the business.
Identify key drivers.
The first step is to determine what is to be included in the business scorecard. There are a few numbers that will be relevant for most businesses. For example, bank balance, accounts receivable balance, accounts payable balance, total sales or revenue for the period, gross margin percentage and net profit.
Then there are the key drivers for your particular business. Every business is different, and over time the key drivers that you report on will change as you focus on improving those numbers and then move on to focus on other numbers in the business.
Key drivers may not be financial. Key drivers may be the number of sales calls your sales team have made or the percentage of people who complete an online purchase after landing on your website. The key drivers may be calculations taken from the financial numbers. For example, return on a marketing campaign. The key drivers may be numbers, dollar amounts or percentages.
Implement systems to create the scorecard easily.
The second step is to look for ways to pull the figures from your accounting system, from your CRM or sales system or any other location that has the raw data from which the key driver numbers can be drawn or calculated. There are many systems available today that will draw figures directly from different systems to create your scorecard report.
The scorecard report is best when it is in a visual format with graphs, pie charts, and other visual representations of the numbers. Backing up the report will be the same results in number format so that they can be looked into further, if required.
Once you’ve put in place the basic systems to create the scorecard report, you need to identify one person to be responsible for collating the information and producing the report for you. This person will be required to complete the monthly scorecard report and have it to you preferably five days after the end of the month or at the very latest no more than ten days after the end of the month.
Take time to review and analyse the results.
Once you’ve put in place the system to have the scorecard report available to you on a set date each month, you need to put an appointment in your diary for an hour to review and analyse the results. During this appointment with yourself have a good hard look at the report.
You will find three kinds of results:
1. Results that exceed your expectations.
These are the good news numbers that deserve celebrating and giving yourself a pat on the back for a job well done. And then tell the team they’ve done a great job too.
2. Results that have met your goals.
These are also good news numbers, however, if this happens consistently month on month, then it may be time to set higher goals and look to increase the future results.
3. Results that are below your expectations.
These are the results that you’re looking for as these numbers are the weak links in your business. Having identified these results, you will need to focus on ways to improve them and in doing so improve the business as a whole.
Monthly scorecard reports are a vital business tool to get under the skin of your business to identify areas that need to be improved. When you know where the weak links are, work on improving them as a priority, and your business will improve.
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