Tip 8: ...and know where you are going.

We all have our ways of knowing how things are progressing. At the start it is almost always focussed on cash flow plus some other “rule of thumb” measures that we know matter in our businesses. As we grow, we start to develop other Key Performance Indicators (KPIs) to tell us how well we are doing. However all this is often very informal, which is fine when we are small and starting out, but as we grow and involve more and more people in the monitoring process, the need to prepare regular management reports comes into play.

Good quality management reports should use Key Performance Indicators (KPIs) that are meaningful to the business, and which reflect the drivers of profits and cash. They should contain a mixture of financial and non financial information. Short bullet point explanations, avoiding jargon, alongside clear and unambiguous figures is a must, with supporting detail available for review if required.

Reports should contain information that is as up to date as possible, as there is no point getting reports and accounts when it is too late to take action. Remember, the only reason for any report is to take action of some kind (even doing nothing as a result of a report is OK as long as it is consistent with the findings of the report).

Use of should be made of “early warning systems” during the course of a month, as a business cannot afford to wait for monthly accounts to come out before finding out something is wrong. Look at daily and weekly indicators, such as sales, cash receipts and payments, production statistics, purchase orders, people movements and asset utilisation.

Finally, don’t assume that the bookkeeper, or accountant, or finance function, or the FD is taking care of the reports and understands them – as a manager you need to make it your business to make sure they do, and that you do as well. 

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