The Problem
Most businesses have insufficient processes and systems in place to record their true activity. When a business owner knows the reality of how their business is performing, they at least have a platform to work from and can make decisions based on facts rather than speculation and anecdotal evidence.
A lot of businesses wait too long to implement a proper reporting structure. We insist on taking action early and pre-empting future problems and this gives you a distinct advantages. Waiting for the fires to start before putting them out is not a sensible approach. We prefer to adopt fire prevention strategies for your business as this way you will feel like you are working in a safer environment.
Not knowing the facts puts CEOs and MDs in a weak position. It is hard to make confident, strong decisions using poor data and reports. Without the right information, collected in the right way, effective analysis and clear planning is impossible.
The importance of reporting is twofold:
- To have visibility into the future (i.e. knowing what is likely to happen round the corner)
- To have retrospective visibility over past performance (i.e. to analyse performance data and use it as a tool to course correct for the future)
If you are driving a car in the winter and your front and rear windscreen are frosted up, you have close to zero chance of reaching your destination. By defrosting both the front AND rear windscreens everything around you comes into sharp focus. Our aim is to defrost your front and rear windscreens for you!
The pain of implementing new systems to record the required data is often the key factor, which prevents business owners from making the decision to migrate to a new reporting platform. This is dangerous because it perpetuates confusion in the business and exacerbates the problem. Doing the hard work of getting a reporting infrastructure set up prevents all sorts of problems in the long run.
Well constructed reports are the secret weapon for CEOs and MDs of ambitious growth companies.
As an example, lack of information across your sales and marketing function will almost always lead to poor allocation of budgets. If you are able to profile – very precisely – your ideal client(s)/customer(s) and can understand which channels to market are responsible for sales and more specifically, what eventually prompted the sale, you will be able to adapt your operating process accordingly.
If your costs are out of control and you lack the reports, which highlight the problem areas, the problems will continue until you have a reporting function to ensure clear visibility across all business functions.
Without reports it is impossible to really know how well your staff and departments are performing. Do you know how effective your team is at controlling costs? Do you have a system for highlighting over-expenditure and a protocol for limiting future expenditure? Have you set annual and monthly budgets? Do you know which of your products and customers is the most profitable? Do you know where your break-even point is? Do you have someone who reviews your monthly accounts for you/with you and can interpret the numbers so that you can course correct periodically, systematically improving your position month after month?
Most entrepreneurs have a natural bent towards optimism – this has many advantages but also some distinct disadvantages. Producing over-optimistic forecasts (which most business owners do!) can be very dangerous. Although it is important to achieve optimum performance from staff by setting ambitious goals it is unwise to makes plans based on your forecasts as this often leads to cashflow problems.
When you take time to zoom out, you can view your business as simply a set of linear processes; cogs in a bigger system. If you can look at your business from an objective and slightly elevated vantage point and see the detail of how each of your processes interacts with the bigger system and record the data produced from each of the processes, you will experience an almost immediate sense of clarity.
Being able to access all the information you need whenever you need it, can make a profound difference to the way you manage your business. Having all your business data at your fingertips means that you can spot gaps and weaknesses at a glance, have clear visibility over the future and course correct daily to ensure you are en route to your destination.
The Solution
‘Reporting’ is simply a case of recording all important data in your business and presenting that data in a range of different ways to allow for effective analysis.
We work with our clients by carrying out a detailed business review at the outset of our relationship. This helps us to identify areas of weakness so that we can implement changes across your finance function. Most businesses have some level of reporting in place but in most cases existing procedures are insufficient to allow for rapid growth.
When we analyse your existing reporting function we ensure that we:
- Determine your Key Performance Indicators (KPIs) allowing you to see at a glance what’s driving the business
- Have daily visibility of KPIs allowing a much faster response time for the CEO/MD and an ability to take immediate action when required
- Produce monthly management accounts/reports within 14 days of month end so the data is fresh and relevant
- Establish reporting processes for sales and marketing so that there is clear visibility over what’s working and what’s not
- Establish reporting processes for business ‘operations’ so that activity can be monitored and improvements can be made periodically
- Create back office systems and processes to make sure the right infrastructure is in place to operate the business efficiently
- Implement processes for keeping costs to a minimum and visibility over expenditure so that managers can understand their own department figures and be held accountable for cost control
- Introduce budgets and targets by department and allocate responsibilities to managers to free up the CEO/MD’s time to focus on growing the business
- Educate managers about gross margin and profitability to help focus resource throughout the business to spend time on the things which lead to business growth
- Understand fixed and variable costs and how to control them
- Analyse trends within the business and within the market and move to more predictable and considered forecasting to avoid panic and fighting last minute fires
Once we have worked with you to establish a sound infrastructure the benefits will be far-reaching…
Benefits To The CEO, MD And Senior Team
Implementing reporting throughout a business allows the CEO/MD to view their business from an elevated and slightly removed vantage point.
With the front and rear windscreens defrosted your business and the world around you will appear crisp and clear.
Rather than being caught up in the day to day work, good reports reveal the efficiency (or otherwise) of the constituent parts of the business and enable the CEO/MD to assume the role of conductor, leading the orchestra while it plays in harmony.
The compound effect of making regular, quick and high quality decisions based on a strong set of data and reports cannot be overestimated. Your FD will work with you to establish the reporting structures your business requires and will put in place a schedule for evaluating the data periodically and using the analysis as a basis for effective and efficient decision making.
