IfDM (Information for Decision Making)

You wouldn't dream of buying a car without a dashboard. And when flying, if you learned just before take-off, that your pilot was having problems with his cockpit controls you'd be off the plane before you could say 'rudder-less'!

"Rudder-less" is a pretty good description of how many small business owners operate, having very little, if any, idea of the key performance indicators (KPI's) that the success of their business depends on. KPI's are the important numbers that you need to monitor to make sure that you're heading towards your goals. Profitability can be measured using KPI's like turnover, gross profit margin, overheads and net profit. Turnover should be measured weekly, whereas a monthly or quarterly reporting cycle would usually be sufficient for the others. One thing is certain, though; measuring these just once a year really is asking for a crash landing for your business. 

As for cash flow, how often do you monitor it? Does your current accountant measure and explain to you the difference between cash flow and profit? It's possible to make profits, on paper, yet run out of cash in doing so; a bit like running out of fuel trying to get to your destination too quickly. KPI's relating to cash flow need to be monitored more frequently than ever in these testing economic times.

And KPI's don't only measure financial performance. After all, the financial results you're getting today are the results of the strategic and operational decisions that you took some time ago. It follows that the decisions you take today will only "feed through" to the financials some way down the line. So it's important to measure the non-financial KPI's that will have an impact on future performance. Examples are "number of sales enquiries generated" and "sales enquiry conversion rate"; these two non-financial KPI's will clearly impact on future turnover.

Using the "Balanced Scorecard" model developed by Robert Kaplan and David Norton, David will work with you to design a set of KPI's for your business and then help you to measure them on a regular and frequent basis.