The Easiest Way To Get A Handle On Your Finances And Monitor Your Business Performance

Creating a discipline to monitor where you are and how you're doing against your goals and targets is critical for running and growing a business.?

But to be able to do it (and not spend days and hours in spreadsheets) - you must have a few things in place first.?

So what are the easiest ways to get a handle on your finances and performance of your company??

It's simple - decide what matters to you in your business, set your KPIs around it and create a dashboard that will allow you to keep your finger on the pulse.?

I have a question for you, how do YOU measure your business's performance??

A book that I recently read, called "The One Thing: The Surprisingly Simple Truth Behind Extraordinary Results" by Gary Keller pushed me to think about the key economic driver in my business.?

Key economic driver is essentially the one thing you get to decide as a business owner, knowing it will have the most significant impact on your business's results.?

What is that one economic driver for you and your business?

One of the biggest complaints I hear from my clients (apart from not getting paid on time by their clients) is the lack of visibility and clarity on where they are in terms of finances.

This is often happening because they don't have a way to simplify taking care of their financials. And I mean both financial admin and management.???

Thanks to cloud-based accounting software and tools, it's incredibly easy to collect data in the times that we live in.?

On the other hand, for those who are tracking their numbers diligently, other problems arise:?

• We are swimming in an ocean of "too much data".
• Financial statements and management reporting often have too much information
• We miss out on the key points that we should be looking at daily or weekly.

Know that you will want to (and can) monitor everything, but that's not the best option - you'll quickly realise that data overload is real.?

That's why every business owner needs to choose what they want to focus on and prioritise specific KPIs.?

So, how do we narrow down the most vital KPIs for our business??

Identify and discover the KPIs for your business?

Here's how you can begin to identify and discover what KPIs to account for, how to choose the right ones, and the best way to propel your business.??

1. Write down and review your personal and business goals?

Discovering the best KPIs for your business starts with a deep understanding of how your business works, what you'd like the future of your company to look like and what your personal goals are.??

Ask yourself, what do you want to achieve personally and professionally??

What revenue and profit levels would you like to get to in your business?

What are the problems you encounter most often?

How do you think these challenges could impact the performance of your business??

What lifestyle are you looking to achieve??

Find the answers to these questions and write it all down.?

2. Choose the KPIs based on your most important goals?

When you know the goals you want to achieve, you can set the perfect KPIs to tell you how well you are performing and where you stand with each of your goals.??

Always have a mix of:?

• Leading KPIs which help you look into the future?
• Lagging KPIs which help you measure the past
• Financial KPIs such as measuring gross profit margin, net profit, working capital, etc
• Non-financial KPIs such as staff turnover, customer satisfaction, operations, quality, Net Promoter Score.?

See below a list of KPIs and other numbers you can start tracking in your business now:?

• Revenue growth rate to measure business growth?
• Gross profit and net profit to measure profitability?
• Number of leads, sales, and the conversion rates?
• The cost of acquiring a customer
• Billing capacity vs utilisation rates (especially for service-based businesses)?
• Average revenue per client and average project value?
• Outstanding debtors balance?
• 90 days cash forecast balance?
• Actual results vs your goals?

The key here is to choose these numbers so that when achieved, they're going to lead to your business's financial success.?

3. Set up ways to track, measure, and quantify the KPIs?

You have listed your goals and identified your KPIs… but what next??

Create a dashboard!?

It's simply a place where you report your objectives and targets (in the form of KPIs) along with the actual performance.

Whether it is an Excel spreadsheet or online accounting software (f.e. Xero business dashboard) - find something you are comfortable with, suitable for your business, easy to update, and displays the flow of information.?

At the end of the day, if it's not updated and monitored, you won't be able to review your finances and KPIs on a daily and weekly basis.???

This also means that your efforts will be in vain if you don't continue to work on them.?

TIP: Consider benchmarking yourself against others in your sector. For instance, maybe you are a creative agency achieving 10% net profit, and you believe that it's a decent result for your business. But given the industry you are in, there is scope for you to do better, and secure a higher profit margin.??

At any time, your dashboard should give you a full picture of where the company stands and where each department is performing based on their goals.?

4. Get your team on board.?

I know you often feel lost or end up alone in this process of achieving KPIs and driving success in your company.?

Did you know you can involve your team in this process by creating a profit culture??

You have specific goals that you're all working together to achieve. Take this opportunity to encourage your team to join you in this challenge, track the progress, and know that together you can achieve outstanding results in all areas of the business.?

Make your people accountable and responsible for the results and encourage them to take corrective actions if they fall behind. It's no good just to measure things for the sake of it.?

Hire and develop team members whom you can trust to take ownership of their KPIs and deliver their contribution to the bottom line.

If getting a handle on your finances has been on your mind recently - get in touch and see how we can help.

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What tactics and strategies do you use to stay on top of your finances?