What numbers help SMEs make key business decisions?

Article by Julia Leak 21.03.16  

Julia Leask of Leask Accountancy Solutions is a Chartered Management Accountant (CIMA) and trainer with over 20 years’ commercial experience working for and with a broad range of sectors. The last 5 years have been specifically dedicated to working with SMEs. Clients have commented that she not only brings her expertise in managing and coaching a business, but also an enthusiasm that comes with treating the business as if it were her own. She is creative and positive, but practical and down to earth and willing to go the extra mile. Your business will be consistently supported in realising it’s true potential.

I guess you are reading this as you want to find out if there is more that you could be doing to help your business. The simple answer to this is possibly yes. Some businesses could do with a bit of help to know which numbers to concentrate on and how to understand what they mean. These are the numbers that help you make the important decisions in your business that make a difference. Unfortunately, there is not a simple solution like buying a piece of software off the shelf. As your business is different it follows that you will need a solution tailored to your specifications. Other businesses’ like yours have been through this process before and been helped, read what some of my clients have said, 

   

You do want to improve your sales, profits, cashflow, don’t you?

Being able to plan for success would be great, wouldn’t it?

Seeing your numbers in a clearer light would help you sleep better at night, I’m sure.

To start with it is beneficial if you are told that there are three groups of numbers that need to be monitored, controlled and reported. These include both financial and non financial data. It is not just the pounds and pennies that you need know about. If you can measure it you can control, compare against it and change it!

Group A

Key performance indicators (KPIs are specific to your business).

A KPI which is not reviewed at least weekly is useless in helping you manage your business. These should be the numbers that you think about most, the ones that motivate you to take action. They need to identify what good looks like for your business. From this you pinpoint where improvements are needed.

These could include some of the following: –

  • Sales leads​​​​(new potential customers)
  • Conversion rate​(at what rate a lead converts to a customer)
  • Conversion cost​(how much it costs to obtain a customer)
  • Sales per salesman​​(how much each salesman sells)
  • Commission per salesman​(£x commission earned)
  • Number of new customers​(how many new customers)
  • Number of returned customers​​(loyal customers)
  • Average sales ​​ (sale’s value)
  • Cost per sale​​​(direct cost of each sale)
  • Profit per sale​​​(sales value less direct cost)
  • Debtor days​​​(how quickly your customers pay)
  • Creditor days​​​(how quickly you pay your suppliers)
  • Cashflow (12 month forecast of all income and expenditure)

This list is not complete and so it follows that you will find there could be many more KPIs more relevant to you. They will help you measure and monitor whether you are hitting your targets. It is worth noting that many of these figures cannot be taken straight from your accounting records. You will need a bespoke system to calculate them. This should be simple and automated as much as possible so that the results can be checked each day. If you want a systems review to help you model the right process call Julia today 01926 298829.

 

Group B

Your accounting systems dashboard numbers

These are the numbers produced by your (preferably cloud based) accounting system and are the sort of numbers that might have sprung to mind at first. These are the more traditional money numbers which include total sales, gross profit, overheads, cash (bank and petty cash), creditors and debtors.

They summarise and confirm your daily figures and give you a (slightly) bigger picture but they tend to lack the details you need for making key decisions. With a good cloud based system you should be reviewing these figures weekly and discussing them monthly with your accountant. As bookkeeping has become more automated, most good accountants should be offering you a monthly fees plan, that includes a discussion about your performance and the improvements you can make

 Group C

Year end figures otherwise known as your Statutory Accounts 

These are prepared months after your Yearend with all your historic data. They are perfect for ensuring that you are compliant with all your legal requirements and supporting your tax return.

However, as far as being used for quick decision making they have little or nothing to contribute. The overheads they detail are primarily needed for HMRC, to support your tax calculation, rather than planning performance and efficiency. With the development of cloud based systems most good accountants will offer these services as an add-on to their value-added services as the software takes care of your compliance. If your accountant is only doing year end compliance and not offering you any business advice you may be losing out. 

A and B numbers (the first two groups) are crucial for planning your businesses success. These need to be known daily or weekly so that you can act on them as soon as they stray from your ideal. Making decisions in your business has to be supported by up to date information. Knowing YOUR important numbers is key for YOUR business.

So, what are your important numbers? Make a list of the top 10 numbers you think are vital to your business, can you find them easily?

Are you struggling to work out which numbers to monitor? The chances are that your systems probably already provide some of your key numbers so you just need to record and review them regularly. If there are some that are a bit harder to identify then email me, I would be delighted to speak with you julia@leaskas.co.uk

You do not need to wait for your accountant to highlight the bad news in your business months after it happened. By putting simple processes in place to review your daily numbers you will remain in control whilst also being able to delegate a great deal of the work to others.

 
Julia
Julia Leask ACMA MiP, CGMA 

Leask Accountancy Solutions

http://www.leaskas.co.uk/

Tel: 01926-298829

Mob: 07855-275099

julia@leaskas.co.uk
Linked In Profile: http://uk.linkedin.com/in/julialeask

Twitter: https://twitter.com/julialeask 

Facebook:Leask Accountancy Solutions