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VIEWpoint Issue 1 | 2022
With 2013 in full swing, you likely have goals in place for the business and are actively pursuing them. But is the rest of your company on the same page? Is your team aware of goals, equipped to meet them and held accountable for progress? Unless you have an effective financial reporting mechanism in place, the answer is “probably not.”
Let’s say you’re projecting sales growth of 10 percent this year. Is your operations team ready for this growth? Have you explored the impact increased sales will have on hiring and equipment needs?
To ensure all departments understand the numbers and the finance of producing, delivering, and selling your products and services, it’s essential to determine metrics and set benchmarks across all disciplines and departments. If you’re not using them already, these strategies for managing and measuring numbers will help keep you focused and lay the foundation for informed decision making.
1) Set Key Performance Indicators
Key performance indicators (KPIs) are numbers and data that tell how your business is doing. You might consider KPIs a compass — factors that point the direction in which your business is headed.
Often, the problem with KPIs is that managers in key functional areas tend to track different metrics — for example, sales quotas, booked revenue and margins. Manufacturing focuses on orders filled, speed and delivery. Finance cares about costs of materials, sales and overhead.
The solution? Each department can have its own KPIs, but they must be linked to the business’s overall KPIs during the annual strategic planning and budget process. Each department must create specific targets with benchmarks to support company objectives.
Planning and negotiations are essential during this process. For example, if sales projects revenues of $5 million, manufacturing must project the corresponding orders filled to achieve the projected revenues.
2) Identify Silos
Data and information “silos” occur when individuals or departments collect and analyze data that they don’t share with the rest of the company — or that they unreasonably delay sharing.
For instance, there’s the jealous guardian hoarding data to increase job security. Or the analyst compiling cost calculations on a spreadsheet no one else can access or interpret. Or the employee who insists, “We’ve always taken two weeks to reconcile the difference between manufacturing and sales.”
Help these employees understand the benefits of using the companywide system. You may need to offer additional training, but the results will be worth the effort.
3) Choose One Version
How many versions of the “true numbers” exist in your organization? Multiple and confusing versions are common when managers aren’t on the same page about how information is being used.
Doeren Mayhew’s Business Advisory Group recently helped a manufacturing client implement a new inventory management system. During the process, the client’s Purchasing Department quoted one cost for making a product, while Accounting configured the same product at a 20 percent higher cost when taking shipping into consideration. This is a great example of the significant discrepancy that can result when departments aren’t using consistent measurement and reporting tools.
The solution is to determine one truth and set a single measurement process using compatible analysis and metrics. But be prepared for resistance. Some employees may lack the analytical skills to implement a new process. If that’s the case, refine the process and get the right people in place to make it work.
4) Store Data Centrally
To maintain consistency and maximize accuracy and efficiency, set up a centralized source of data reporting that all team members can access. And if possible, avoid downloading data into general spreadsheet programs, because their formulas and data links often have inherent problems.
You can find cost-effective data tracking and reporting software solutions that are also quick to implement. And for those last-minute requests, customized templates are available. They’re simple to set up, and can be based on your precise needs and specific formats to meet your reporting requirements.
Numbers aren’t glamorous. But knowing the stories they tell is key to making decisions that will maintain your company’s market share, keep you competitive and help you grow.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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