Beth Ward, who heads up our sister company, Conatus Bookkeeping, also had an article published in the latest issue of Suffolk Director magazine, which you can read here.
It's a concise summary of how best to work with management information, so we've reprinted it below...
Conatus Bookkeeping
Our bookkeeping team are passionate about trying to help businesses develop so that they have increasingly more useful information available to them, which is tailored to suit their particular needs. One challenge with this, however, is a potential lack of understanding of the information produced or that, historically, the focus may have been on potentially irrelevant information.
Developing an understanding
Consequently, we have found a key element missing from so many companies, is the development work that helps staff, managers and owners to understand what information is, or could be, available and how to use it in a productive way. Yet, with a little investment in time from our team, we can guide businesses towards making positive changes.
We have found that companies who are as open as possible with their staff about the financials, and who spend time helping them to understand the true key performance indicators (KPI’s) within their business, tend to be the ones who thrive and survive challenging situations. That investment can prove invaluable, as it not only gives someone an appreciation of the information available but also in finding ways to adapt it to suit that person and their personal ways of understanding.
In our experience, the best companies we work with have companywide KPI’s – usually no more than five or six in total – and they may well have departmental and possibly individual KPI’s as well. If these measures are correct, the relevant people can assess the current performance of the business, department, or person, simply by looking at these KPI’s.
But, how do you know what to measure?
Many, simply measure performance by looking at the turnover or bottom-line profit on the P&L. But we love to work with our clients to develop their understanding of their business and the key areas to measure efficiencies. For example, if a business services machinery, whether that’s a car or a boiler, is there a set time allowed and price for a job? If so, a KPI may be the efficiency of the technician/engineer. So, if a 2-hour job only takes 1hr40, you know you are doing well at 120% efficiency.
However, in that example, if there are then lots of complaints and rectification work required, you may be losing all the benefit. Therefore, a second KPI to monitor may be ‘returns’ or equivalent. Guiding all staff and management on how to recognise and use these measures, so they can provide ongoing evaluation of the business is incredibly rewarding and worth the effort.
When the penny drops with your team, you will find that big changes can happen fast if required. In fact, things may run so well that the business owner or director only needs to step in to make small tweaks or changes. It’s an investment in time and possibly money that’s definitely worth making.
If you'd like to know more, please get in touch with the Conatus Bookkeeping team on 01473 851587 or email contact@conatusbookkeeping.co.uk.