Hands up all of you who get all excited about your annual financial statements and think these useful in managing your business? I suspect not many, especially where you don't see these until many months after your year end! What about regular management accounts? Yes, much better, assuming of course they are prepared on an invoice or "accruals" basis (that is, not just reporting cash received or spent) including inventory but still not enough.
Effective reporting should also focus on those areas in your businesses which are critical to your success and growth. These vary from business to business but let me give you a few examples:
- Your average $ sale. Once you know what this is you can work to improve this.
- Margin analysis across various divisions, product or service lines, customer segments, or suppliers which is critical to profitability.
- The number of new leads your marketing efforts are producing. Why waste money on expensive advertising which may not be working?
- The cost of acquiring a new sales lead comparing your different marketing methods to enable you to concentrate on the least costly.
- Your conversion rate of new sales leads. You've gone to all the trouble of getting a new lead, so why waste one?
Don't put up with useless annuals or bi-monthly cash reports produced as a by-product of GST return preparation designed to suit your accountant. Accounting software is fantastic value, straightforward to use and is easily set-up to produce really useful business information BEFORE it's too late to make a difference!