Several weeks ago I was talking to an entrepreneur who was frustrated because he had a question "how can a business measure its performance" but couldn't find the answers he wanted.
His accountants weren't interested in helping to monitor the business going forward. He had looked around for finance courses but these seem to be focused more on how to prepare accounts than how to understand accounts and how to set the right key performance indicators.
So I have decided to start a week by week course on finance for non-financial managers and how to measure performance.
Performance Measurement Is Not As Exciting As Sales & Marketing
I know that finance and performance measurement is not as exciting as sales or marketing. I am a chartered accountant by qualification but I have seen the light.
But understanding finance, performance measurement and financial control is an essential part of improving the profitability of your business and Knowing Your Key Numbers is Pillar 1 of my Eight Pillars of Business Prosperity.
Shocking Results: Turnaround Help Failed Because Of Weak Financial Information
A few years ago in the UK there was concern about the large numbers of small businesses who were failing. This is a common problem throughout the world and I regularly see quotes for statistics like "only one business in five will survive past their fifth birthday."
In the UK this focus resulted in talk about changing the insolvency laws to encourage a rescue culture.
The idea was that businesses should be encouraged to seek turnaround help earlier in their decline and then more businesses could be saved.
This would avoid all the knock-on difficulties bankrupt companies cause to their employees, suppliers, customers, providers of finance and the government.
Trial System
A trial of a special scheme was set up in the UK West Midlands where businesses in difficulty could have the services of a turnaround expert for a set number of days without paying a fee.
The scheme failed because a significant proportion of the businesses who applied for help had totally inadequate financial and performance information.
The review report was a damning condemnation of management who were operating with little or no performance feedback.
As the saying goes "If you don't measure it, you can't manage it."
The Reason Why "Your Key Numbers" Are Pillar One
Fundamental to any improvement effort is the principle that you must know where you are.
It is like being lost in your car and you stop to ask someone to help.
If the person you ask knows where you are and where you want to go, they may be able to help but if they don't know where you both are, there is nothing they can do.
A Common Failing
Many of the businesses I talk to are so focused on day to day selling and operational activities that they know very little about the way their business is performing.
Often they can't even tell me what their sales were last month let alone margins, profit or cash.
A Week By Week Finance & Performance Measurement Course
Each week I am planning to write a blog post to teach you a little more about finance and performance measurement starting with the basics.
I will keep these short but at the same time explain slowly and steadily so that it doesn't baffle you, bemuse you or bore you rigid.
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