The numbers you should see every week

Ask an owner how the business is performing and you’ll often hear “we’re busy”. That tells you very little. Busy doesn’t necessarily mean profitable.

The point of looking at numbers every week isn’t to have more reports. It’s to make decisions while there is still time to do something about them.

The signs you’re not seeing the right numbers

“We’re busy” is the first. The others are just as common:

• Relying on the bank balance to tell you how things are going.
• Waiting until month-end to discover a problem.
• Reports that nobody understands, or nobody uses.

By the time a problem shows up in the month-end figures, it has usually been building for weeks.

The six numbers I’d start with

The exact measures depend on the business, but for most businesses I’d start with these six:

• Cash available and the forecast. Can we meet our commitments over the coming weeks?
• Sales and orders against target. Are we generating enough business, and what is coming through?
• Gross margin. Are we making enough from the work we sell?
• Overdue customer payments. What money should already be in our bank?
• Delivery or service performance. Are we delivering what we promised customers?
• Productivity or utilisation. Are we making effective use of the people and capacity we’re paying for?

Each one needs a target, and someone responsible for acting on it. A number on its own doesn’t tell you enough. It’s the gap between the number and the target, and who owns closing it, that turns a figure into a decision.

What it looks like in practice

One business I work with had an area that wasn’t profitable. Without a proper breakdown of the numbers, much of the discussion about it was guesswork. They were trying to decide whether to close it or find a way to make it work, and even the person running that area didn’t properly understand what was driving the losses.

We broke the figures down by business area and identified why it wasn’t profitable. That gave everyone something specific to act on, rather than an argument about opinions. Performance is now tracked, and a business unit that was failing has turned a corner.

The common mistakes

The first is looking at sales and assuming that tells the whole story. You can grow turnover while making less money, putting more pressure on cash and creating more work for everyone.

The second is collecting lots of figures without deciding what to do with them. I’d rather see a handful of useful measures reviewed every week than pages of information that nobody acts on.

Share them with your managers

If managers are responsible for performance, they need to see the numbers that show how their area is doing. You can’t expect someone to improve profitability if they have no visibility of sales, costs or margin. It’s one of the most common gaps I see, and part of why managers aren’t managing.

That doesn’t mean sending everyone the full accounts and expecting them to understand them. Share what is relevant, explain what it means, and help managers see how their decisions affect the wider business.

Where to start this month

Start with a simple spreadsheet. Agree five or six measures, and for each one:

• Where the information comes from.
• Who updates it.
• What the target is.

Put the actual result alongside the target each week, and build up a picture over time.

Then set aside a short time each week to discuss what has changed, why it has changed and what needs doing. That conversation fits naturally into a weekly management meeting, which I’ve written about in how to run a management meeting that actually changes things. You don’t need new software to start having better conversations.

What many owners actually need

This is the view some advisers might disagree with. A lot of advisers tell owners they need management accounts without explaining what those accounts should contain or how they should help. Some accountants charge a premium for a report with charts, but the owner is still left wondering what it means and what to do next.

What many owners actually need is a good management accountant: someone who understands the business, interprets the information and challenges them. Producing and handing over the numbers is only part of the job. The value comes from using them to make better decisions.

Getting the right numbers in front of the right people, and building the habit of acting on them, is a big part of the work I do through mentoring.