Last month, I wrote about how the Components of a Financial Plan should “Hang Together”!
Once you’ve developed a financial/business plan and have a “common point of view” among your executive team, the challenge turns to implementation. One of the biggest challenges that many companies face is “staying on track” or focus.
There are many reasons companies lose focus. Perhaps the most common are the day-to-day crises that affect any business. Customers have emergencies, equipment breaks, employees are out sick, executive management seems to change priorities, and personal priorities get in the way. The list seems endless; and taken together, the result can be that priorities set during the planning process can get lost in the shuffle. The energy that existed behind the business plan just after it was completed can seem like a distant memory.
One way to prevent this is regular and consistent review of results versus goals. While we generally think in terms of financial goals being reviewed at the end of the month, there are more immediate goals that we can review as well. Often, companies, refer to these as “Key Business Drivers” or “Weekly Performance Metrics”. Whatever they are called, they are meant to be early indicators of whether you are moving toward your longer term business goals and are measurements of the overall health of your business.
Examples of potentially meaningful performance metrics include: sales calls made during the week, number of customer complaints, refund dollars given, percentage of up (or down) time for a particular process or system/machine, lost time due to injury, new customer orders, on time shipments, number of shipments per day/shift, etc. The list is seemingly endless, but the point is finding a reasonable number of key measurements that tell you how your business is doing on a daily or weekly basis.
At one point in my career, I worked for a retailer who could look at the shipping dock on Monday morning and tell me the weekend sales number. After a while, I could do it too! I’m willing to bet that you can think of indicators that are truly important to your business and tell you whether things are going well or poorly even before your financial statements are produced.
In a recent client meeting, key management and I determined that the difference between profit and loss was that the company was shipping one less load per week than in the past. With this knowledge, the company can know every Friday whether they’ve had a successful week or not! More importantly, it gives them a very measurable goal on which to focus.
If you can find the key performance metrics that affect your business, then the monthly financial statements won’t contain any surprises! You’ll know how your business is performing every day and have a clear expectation of month end results.
If you need help with your business, financial plans, or key indicators, please give me a call at (314) 863-6637 or send an email to And, remember . . . Your Cash Is Flowing. Know Where.
Copyright @ 2006 Homza Consulting, Inc.