Best Practices to Proactively Track Business Performance

By Pat Brennan, Partner

“How is my company performing and what, if anything, should I be doing to keep on track?”

That’s a common question owners should ask themselves daily. Just like going on a trip, they know their desired destination — sustainable profitability and working capital sufficiency. Yet without a series of early warning indicators, they begin to lose altitude and can be headed for a crash before they have a chance to make a course correction and save themselves.

It’s difficult to navigate a business using standard financial reporting. A monthly balance sheet, income statement and statement of cash flows just aren’t frequent nor informative enough to stay on top of what’s going on in a business. A decline in order bookings or backlog might signify a decline in revenue. If an owner follows backlog information and sees it dropping day to day, expenses could be cut sooner and working capital preserved. Wrong decisions can be avoided if there is visibility into these numbers.

Many companies operating today lack the necessary working capital to weather a rough period. Owners need information tailored to their business to track progress. There are key best practices that forward-thinkers use to access real-time information about the direction of their business, including:

• Accessing current knowledge of their company’s break-even point;
• Maintaining a 13-week cash flow report; and,
• Designing a performance dashboard.

Combining these best practices can answer the “How is my company performing?” question. Frequent review of these tools allows owners to make essential changes sooner to impact profitability and preserve critical working capital... MORE