By Dave Hickey
This is part of a piece I wrote almost two years ago about ‘staying on top of the numbers’. Too much of it is still relevant.
In Ireland we’re great at keeping score. Whether it’s in sport, socially (whose round is it?) or in family life (whose turn to do the dishes?).
Why then are we so poor at keeping score in business?
In a football match knowing the score means you know what you need to do to win. But when it comes to our livelihoods – our businesses – we seem to be content, in many cases, to wait until our external accountants’ report to see how we’ve performed.
Why don’t businesses track their performance regularly?
In the early stages of the pandemic, I consulted with over 40 businesses of all sizes helping them to secure funding and/or re-organise and/or re-imagine and ultimately re-open as we emerged into the next normal.
Some had turnover in the millions and others in the tens of thousands. Some were long-established, some were start-ups. Some employed dozens of staff, others were one-person operations.
Almost all had one thing in common: when lockdown happened and turnover dried up, they hadn’t a clue how the business was performing. Or if they did, it wasn’t based on data, it was more a feeling.
- Was it on track to meet its goals? What goals?
- How was performance to date against budget? What budget?
- How long could the business continue in lockdown until it ran out of cash? No idea!
A typical response was “No, we don’t do management accounts. Our accountant is preparing last year’s accounts and we should have them in a month or so.”
To be fair, firms of accountants all across the country were working flat out to get financial statements to their clients, but they were in lockdown as well, and took a while to get to grips with their new reality.
Many clients were low on cash already since lockdown happened just as business should have been picking up and generating positive cash flow after a long winter.
As I helped many clients prepare monthly financial projections, cash flow forecasts and break-even analyses I kept returning to a key theme for all of them.
‘Find one simple thing that can act as an indicator of how the business is performing, monitor it constantly and take action based on the results.’
Knowing how long a business can perform at a certain level of weekly revenue before it hits cash flow problems, should be meat and drink to our business owners. But it’s not.
It’s a serious gap in our country’s business repertoire – in a country that prides itself, rightly, on our entrepreneurial spirit. It should also be a major concern to banks and funding agencies, which expect business owners to be ‘on top of the numbers’.
Certainly, most businesses are more complex than this. But complexity can be hard to measure and take time to analyse – time which many business owners feel they can’t commit.
It has to be better to embed a discipline of measuring, reporting and acting on an easily understood indicator than not measure anything at all.
There are plenty of tools and services available to help business leaders stay in control without burdening them with too much administration or paperwork.
It’s an area that banks, support agencies, HEI’s and professional service firms need to tackle together to help build more resilience into our businesses.
If you’d like further information on how to get relevant, accurate and timely information on your business, contact DHKN, or email me directly – dhickey@dhkn.ie.
