We are regularly asked at Accounts & Legal: how can I set my business up to succeed? And for us the answer usually includes as a major factor analysing, monitoring and improving business performance.
If a business owner can’t see how their business is performing, how can they make the necessary adjustment to focus the business or assess how a particular strategy is working (or not working)?
For us the answer to “how to monitor business performance?” almost always starts with putting in place systems that allow the business to gather quality data and pull reports quickly and easily. We recommend using cloud accounting systems that offer fast accurate access to performance data that can be viewed anywhere anytime.
Depending on the business we might recommend a range of systems that will certainly look at financial performance but may well dive into other areas of the business for example, how the business deals with stock, or how it manages its debtors and creditors or even how a business deals with timing differences between when it invoices for a piece of work and when that work is paid for.
As platinum Xero partners we work alongside our clients to ensure that our clients fully understand how to use the Xero system and how to leverage that system to deliver quality reporting at all levels of the business.
Once the systems are in place to record data accurately we work with our clients to build a set of management accounts that analyse and report that data in a way that is useful to the business. What management accounts contain changes from business to business and could involve analysis around revenue generation, direct costs or overheads as well as interrogating how a business is managing its debtors and creditors over time.
Management accounts (if done in the right way) can become a key component in monitoring business performance presenting metrics and operational indicators in a way that will allow directors and stakeholders to effectively interpret where a business has performed well and where additional focus needs to be placed in order to deliver results.
The flip side to the question of how to monitor and interpret business performance is the question: What constitutes good or bad business performance?
When considering business performance, it is always essential to look at the business goals and ask the question: what are the business’s targets in the short, medium and long term? Whilst these goals are typically put down in a business plan at Accounts & Legal we work with our clients to breakdown these goals into tangible metrics through financial forecasting. Good business monitoring can also help to identify a good time to consider selling your business for the optimum value. This can then be monitored and assessed as the business grows and develops. Forecasting should ultimately become the benchmark upon which a business performance can be assessed.
Get in contact to find out about the affordable and practical services we offer for business monitoring, oversight and reporting.