by Warren Hayford
Whenever your weekly or monthly reports come out there’s a certain amount of confusion and disagreement about their meaning. Why is this? You spent a lot of time with someone defining the numbers that should be on the report, testing and building the report and yet every month or every week the numbers come out and there are problems.
One reason is that the way you group the numbers which may have been to meet an accounting need or a marketing need or an operations need or a sales need doesn’t meet the need of the person who’s reading the reports.
When the reports were created you wanted to see a lot of detail about a certain item because it was a priority to the organization then. But, two years later, you have taken care of that priority. You only want to see a summary level to see that it hasn’t become a problem again.
Another reason people find the numbers hard to read is very often they’re focused on a single number for a single period.
For example, you’ll look at the January sales number for a specific business unit. But you can’t tell much from a single number.
What you really want is a time series. You want to see several years of monthly numbers to give you a sense of how this Key Performance Indicator (KPI) is moving relative to other important KPIs.
If you are like the rest of us you receive your numbers from reports that show the raw numbers. You’re not looking for how many dollar sales we had in the month of June. You’re trying to find out whether or not you are going to reach your target for the year.
Different purposes require different numbers. You might be trying to understand whether your sales is going to reach the forecast for the year. Or if a ratio of our numbers meets the requirements of a long covenant. Your balance sheet and income statement do not fill all needs.
When you don’t provide the numbers necessary for each specific purpose, you add the potential for confusion and error. Different people using different formulas will come up with different answers. This flaw makes our numbers a barrier rather than an aid to the clear understanding of our organization’s performance.
So if you really want to improve the effectiveness of your numbers do the following. Make sure you provide numbers the way people need them. Provide a series of numbers rather than an individual number so they can see trends. And provide people with more than just the raw numbers so they can see and act to improve your business.
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