Pursuit of Excellence Blog

Become 30% More Successful in Your Business!

Posted by Dawn Garcia on August 7, 2018


Financial paper charts and graphs on the table

If you love numbers, or have a business in the financial sector, you probably love the end of the month, where you can evaluate what comes into your business versus the outlay in expenses. For the rest of us normal folks who are busy all month trying to bring in revenue, the end of the month can be a trepidatious event, where a reckoning and evaluation of results occurs. Ugh! 

Maybe you avoid monthly reviews, unless you know that the picture is good. Or maybe you put it off because it takes time, and it's hard to get the numbers to match. Or maybe, you just aren't a numbers person, and really would rather have Calgon, take me away! If any of these situations fits you, this article is for you. Checking your monthly performance doesn't have to be painful with the right data and systems, and when you use them faithfully, you'll make better decisions for your business. In fact, business owners who know their numbers, and manage performance to targets are 30% more successful! Get into the habit of a monthly check-in, and see your business grow to achieve your goals. The benefit really does outweigh the hassle. Ready?

 What Should be Measured?

The first data point that business owners usually grasp is net cash flow, or the amount of liquid assets into and out of your business. The amount of cash will be relative to the type and amount of sales of products and services, however this amount largely determines your ability to pay the expenses of the business, in order to continue in business. Cash flow is measured on a Cash Flow Statement that includes liquid assets from operating, investing and financing activities.

The second critical tool for managing a business of any size is an Income Statement, or a Profit and Loss Statement. This includes a calculation of gross profit converted to net income. This allows early identification of areas that may have higher costs than expected; managing these costs yields higher profits. Increasing the sales volume of products or services that have a small profit margin yields a minimal benefit to sustainability and company profits. The best profit plan is to keep costs as low as possible without compromising quality or service.   

     Related Article: Which Business Accounting Software System is Best for my Business?

The third critical tool is the balance sheet, which shows at any time the balance of assets to liabilities. One of the biggest values from the Balance Sheet is to capture money owed to the business (receivables) versus money owed by the business (liabilities). One metric that we find particularly valuable from the Balance Sheet is the use of financial ratios, to gauge performance. Two liquidity ratios that we commonly recommend are the Current Ratio, which equals current assets divided by current liabilities, and the Quick Ratio, which equals cash plus marketable securities plus accounts receivable divided by current liabilities. These help clarify available cash.

Use Financial Software Tools 

Even if you're good with Excel and financial formulas, there are well-designed systems to make tracking your financial performance much easier and more accurate. Simply find one that works for you, and update your data monthly. One that we like is LivePlan, that allows a direct connection to your bookkeeping system (some of them), so that you can easily compare performance from year-to-year, or past periods, and forecast for the future. You know your business best, and the right tools help you to make the best decisions. Knowledge of what the measures mean, and what changes will best create desired results is needed, however these tools substantially reduce the human time spent with these functions. 

The right financial tool should have the following elements: 

  • Ease of Use - Should be suitable for the average person, without a finance or accounting degree.
  • System Integration - Most financial/forecasting systems interface with bookkeeping systems, increasing value and accuracy. 
  • Accuracy - Formulas for standard calculations that are accurate and consistent are key, with warning messages if values don't match default parameters, like % calculations.
  • Reliability - Similar to accuracy, the foundation of the tool has to be built to match GAAP standards. 
  • Priced to Value - If the tool isn't affordable, it won't be used. Fortunately, there are a number of options within reasonable software license fee schedules. 
  • Multiple Accesses - Nearly every business owner needs to have the help of some financial gurus at some point in their business. We meet regularly with our clients, and discuss financial performance as part of our 90-day checkins. Having direct access to the financial performance and forecasting system offers efficiency and value to both parties.  

 Balance with Other Metrics

While the relative importance of financial measures is significant, other performance measures should be evaluated at least quarterly as well. Common measures of importance often include evaluation of specific strategic milestones, quality and service indicators such as a NPS score, and employee indicators such as turnover, worker safety and education/development hours. High performing organizations know their numbers, and manage performance to targets and benchmarks. Your organization can be on the path as well, if you manage to your numbers!

Organizations that struggle to identify and manage to their performance numbers can still get into the habit of managing to performance, often with some external accountability and system coaching. Help your organization to become 30% more successful, by managing your numbers! If you need help, we can get you started on a better habit, that's actually painless and fun! Contact us here: 

Let's Talk for a Moment...

Dawn Garcia is Principal and Founder of Pursuit of Excellence LLC, an independent business management consulting firm specializing in service-based businesses; delivering leadership, strategy and execution expertise. Experience the Excellence Driven® System for your business, and achieve the results you need! Every business needs help at some point; great business leaders actually get help when needed, realizing greater returns. When you need help, consult the experts. Our success is your success! 

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