Unsure on which are the important numbers?

by | Sep 22, 2022

Identifying the Key Numbers in Your Business

Knowing the important numbers in your business is essential to making informed decisions that impact your business. As a Business Owner, Executive Leader, or Non-Executive Director, are you:

  • Frustrated by the quality and/or the quantity of financial information that you are presented with?
  • Feeling that you can’t “see the wood for the trees?”
  • Unsure on what the important numbers are?

Whilst I am a qualified accountant and experienced CFO and therefore able to interpret the detailed figures with ease, the fact is that as an Executive Leader or Non-Executive Director, I don’t want to.   What I want and need is less information and not more. But that information needs to be the “right” information.

6 Tips to the “right” information

From my experience as a Chief Financial Officer, Non-Executive Director and Treasurer, here are my tips for what I like to see in management reports:

  1. Simplicity
  2. Easily understood – ie. presented in a visually appealing way
  3. Relevant information only
  4. A snapshot of current performance and position:
    • Relative to budget and prior periods
    • Operational metrics in addition to the financials
  5. A predictor of future performance:
    • Forecast of where we are likely to land at the end of the year
    • Lead indicators of longer term performance
  6. Answers the question “Are we solvent?”
    • Working capital position, and more importantly
    • Cash flow forecast

What might be referred to as the Critical Numbers to inform business decisions.

Key Performance Indicators (KPIs) to Track

In the first instance I suggest that you sit down with your accountant establish what the critical numbers are and agree the scope of the management reports that you want to see.  If you are unsure on how to obtain these numbers or how to interpret them, don’t hesitate to ask me for help.

Over the years of working in business as a Chief Financial Officer, and as a Board member I have seen financial reports for the Board that comprise 20 pages of MYOB reports, and accountants that struggle to tell you if made a profit or loss, let alone how that varied from budget, or why. Frustrating.

I have worked with other accountants whose standard response to a question is “That’s what the spreadsheet says” or ” I can send you the spreadsheet with more detail if you like“.  That’s even more frustrating.

What I often see in smaller organisations is that the most senior finance person feels a bit “lonely at the top”,  and doesn’t have anyone to ask for guidance on how to improve the reporting.   In working with these accountants I have mentored or coached them to becoming valued partners in business through providing less quantity and more quality information, in the context of the Bigger Picture.  To be client focussed, providing the information the business actually needs to drive decision making, as opposed to providing the business with the information the accountant thinks they need (or is easiest to produce!).

Taking Action on Your KPIs

Knowing quite a few business owners, it’s amazing how many receive financials but don’t understand what they are reading at all. Their CFO or Accountant simply coughs up a report that complies but doesn’t mean anything to the business owner meaning they are blissfully unaware as to what is really happening. I’ve always felt you wanted the reports to mean something. It was important they were easy for all of us to read as a family and the General Manager group. The data had to give us something to aim for with benchmarks or indicate how we were travelling over time. It wasn’t about the most comprehensive report, but more about something meaningful that hopefully incited us to step into action on certain items.

Jay Walter,  General Manager of  JWH Group Pty Ltd

Written By Debbie Millard

Master your business through strong leadership, knowing your numbers and empowering your people

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