Building your monthly management report is a lot like building a house. The analyst is the architect - a good architect can design and build a sturdy house with integrity that functions well for most people. Likewise, a good analyst can design and build accurate management reports which cover the components most managers want to track most of the time. 

A great architect builds a house that meets the unique current and

future needs, priorities and preferences of their client. Similarly, the needs, priorities and preferences of each company are unique to them and should be reflected in their management reports.  

As in many things in life - where we place our attention is what will change. But, if you try to focus on too many things at once, nothing receives adequate attention. 

For smaller businesses, it has been my experience that monthly financial reports consist of little more than an Income Statement and Balance Sheet. Although most of the information is there, it often doesn't provide the visual story of where you have been, how you're trending and whether or not you are going to meet your goal(s). Let me suggest a more useful approach:

 
Step 1 - Perform a Financial Review
What better place to start? A comprehensive financial review at year-end is a great time to take stock of the financial health of your business. You can't know where you want to go until you know where you have been.   

And, a thorough financial review will point you to where you should set goals and focus your attention in the coming year. How have the key financial elements of your business been trending?

• Revenues, gross margins, expenses, net margins? 
• Profitability by product group?
• AR days, inventory turnover, current ratio, debt balances? 

Don't be surprised if the review raises more questions than you have answers. That is not uncommon if you and your business are relatively new to this process. It will get better! 
 

Step 2 - Develop Key Performance Indicators
Or course, there are many operating parameters that drive profitability which can't be found on the financial statements. What are some of the key factors for your business and how are you performing on them? For example:

• Sales - revenue by sales rep, store or geography; opportunities won/lost
• Customers - % repeat customer, top 10 customers and recent activity
• Service - call volume; # of complaints by reason; speed to resolution
• Operations - revenue per transaction; inventory levels; QC standards
• People - hiring of key employees; retention rate; safety standards
• Strategy - top initiatives; milestones

Which few are really important to your overall business performance?

Step 3 - Create your Dashboard
Now it is time to customize reports to meet your needs and priorities. Keep an eye on the big picture while laser focusing on those few metrics that have the greatest impact to the success of your business. 

At a minimum, a dashboard should include revenue, gross margins and net income. Beyond the basics, it depends upon the information you need to run and improve your business, such as profitability by product category or region as well as expenses by category and financial ratios. 

And, which areas need your special attenion? Perhaps this is the year for expense reduction or inventory to turn more quickly. Success of a new product line may need to be tracked, service levels improved or debt paid down.

Design your dashboard to meet your needs and objectives.  Set priorities, define goals and track progress.  Pretty simple. And, unlike a house, management reports will always will be a work in progress - if your needs or priorities change, so can your metrics. 

Until next month, Point Your Business Where it Needs to Go! 

Best Wishes,

 
Kelly
©2013, Turning Point Financial, LLC