No matter what market you are in, if you don’t know the health of your business, you are setting yourself up for failure. Business owners who are aware of their business performance metrics and have clear visibility of potential opportunities and risks are much more likely to succeed.
Regular management reporting is the backbone of a successful business. Savvy business owners use this reporting to monitoring performance, track progress against plans and make strategic business decisions. They understand that reporting that is complete, accurate, timely and well-presented is integral to the business and essential for success.
Here’s how to effectively report on the health of your business:
1. Insist on timely and accurate reports
Outdated information and/or inaccurate reporting can severely hinder management’s ability to act in the best interests of the business and staff. A positive sales trend that is reported six months after it occurred could cause the business to lose out on potential revenue. Inaccurate expense reporting may result in a year-end deficit, leaving management little choice but to cut costs. With numerous automated tools available, there is no excuse for not knowing your numbers.
2. Gain a holistic view
It is important to report on both financial and non-financial performance. Focusing on your budget alone may yield a positive financial outcome, but if you do not also report on how you are tracking against your business KPIs you may find you are drifting away from your long-term growth path.
Goals and KPIs allow you to set key business development milestones, monitor customer engagement and maintain your core business values. Incorporating non-financial metrics will bring the data behind your business to life.
3. Clearly communicate the results
Simply having the data is not enough; business owners must understand the ramifications of what is being reported. Rather than running through financial statements or spreadsheets, ensure that your management reports are visual, utilising easy to read graphs, charts and commentary that provide an instant snapshot of profits, cash flow, etc.
Make time for regular reporting meetings, where you can discuss the results and ask questions about the data so you really understand it. If you can’t be in the same room, make sure you have a copy of the report ahead of time then take advantage of the flexibility of technology like phone conferencing, Skype, Google Hangouts, etc, so that all the relevant people are present and engaged.
4. React quickly and appropriately
As we said at the outset, effective management reporting enables business owners to identify opportunities and risks to the business. But the business will only be successful if management then acts on these insights.
Using a variety of metrics and reporting periods will allow you to put short, medium and long-term plans in place to address business challenges and give you a view of future prospects. If you are falling short of targets, timely reporting will allow you to put temporary measures in place to address shortfall or adjust your end-of-year projections. Ultimately accurate and timely reports will allow you to make better business decisions.
We love helping RTOs to achieve financial clarity and independence and we have helped out many clients, providing them with surprising and useful insights into their business. If you want to know what to look for in your business data, give us a call today.