Business owners/managers, need accurate and timely information in order to manage appropriately. Problems can’t be solved if they are not identified. The ability of business management teams to quickly identify problems or successes within the business environment will make the difference between a prosperous business and one that teeters on failure.
Problems and successes require equal amount of analysis and management intervention. For problems, management must change people, process or technology. Where successes are achieved, management needs to understand the root cause so that the process can be replicated.
One of the quickest and easiest ways of identifying problems/successes is by creating a reporting structure that produces critical measurement reports easily, on demand from existing data bases used within the business.
Implementing reporting structures are imperative and can be achieved following these steps.
- Ensure that the accounting package has a “chart of accounts” that has sufficient granularity to ensure in depth analysis of sales, cost of sales and all expenses.
- Create links in the accounts that associate the various costs to the sales generated.
- Ensure that ALL of the cost of sales are correctly allocated and associated with the relevant sale.
- Make reporting a high priority in the business and ensure that managers use the reporting structure to analyse their areas of responsibility.
- If reporting has a high profile then other activities are subservient. Make this point regularly.
- Define the reports that will be required to analyse the business.
- Set up parameters for “exceptions.” High and low i.e. below standard and exception.
- Report regularly on these exceptions. Define the time frames when managers need to review these reports.
- Static information such as ratio analysis with the appropriate standard creates an appropriate benchmark for measurement.
- Graphed information over time creates a trend and a picture of the relative performance. Add to this a standard and the visual presentation can be easily interpreted.
- Create formal management sessions where exceptions are discussed with a defined agenda. An action plan needs to be formally created, communicated and measured to ensure remedial action has been implemented and is having the desired affect.
- Identify key measures for each area or department.
- Review the relevance of these periodically and change them when appropriate.
- Communicate the results to all levels of staff.
- Use a semi/formal session to communicate the results per area.
- And the corrective measures required (if required)
- And any changes to procedures etc that will be implemented or required.
- Celebrate good results.
- Make the results for all areas visible to the rest of the business.
- Celebrate success and exceptional performance.