Leading by the Numbers


Given that the rate of business—and the world in general—has gotten a lot faster over the last few years, and the economy has obviously become tougher, small business owners need to know their numbers quicker than ever.

However, the prospect of amassing all of a business’s financial data, including non-financial data that affects its financials, can be overwhelming. It is vital for business owners to decide what data is a priority for them to collect and review regularly, since often the timeliness of a decision is just as important as the decision itself. Data takes the guesswork out of decisions about when a product is delivered, when materials are ordered, when payments are collected, and how prospects are followed up with.

The following information is most critical for day-to-day decision making, depending on the type of business:

  • Current cash position (cash on hand)
  • Accounts receivable—past due
  • Accounts receivable—five largest balances
  • Work to be billed in the upcoming week, month, or other specified period of time
  • Current week’s workload, orders, and jobs in progress
  • Accounts payable for the upcoming week. Month, or other specified period of time (including payroll and vendor bills)
  • Assessment of current inventory
  • New business pipeline for the upcoming week

Delegate data collection to key personnel:

Data collection is overwhelming if business owners take on this responsibility by themselves. Have employees in charge of these areas provide the numbers weekly, give them the tools necessary, and hold them accountable. Work with employees to ensure data can be extracted from work orders, computer systems, and even the accounting department. Standard templates can be created to provide uniform reporting week in and week out. Source data should accompany these reports when possible in case further questions arise.

The accounting department or bookkeeper can report on accounts payable and receivable. Supervisors can report on the upcoming week’s workload, and a marketing manager can report on new business in the pipeline. This shouldn’t be an additional task for them, but rather a way for them to be held accountable. By reporting, the staff will have vital data that will empower them to make better decisions without the business owner.

Schedule a Monday morning meeting:

The information gathered by key personnel, which can be referred to as a “flash” report, should be reviewed in a Monday morning meeting each week to make sure the figures are discussed and steps are taken to improve the business or maintain efficient operations. Also, compare the numbers week to week to monitor changes. Without a meeting, the numbers rarely get reviewed or shared with other key company personnel, and a plan of action based on the numbers is never formulated. Because this is a collaborative effort across departments, employees are involved in, and responsible for, the growth of the business as a whole, not just their individual tasks.

Ask for, and expect, some data immediately:

There are times when the business owner will need information in real time. The business owner and the company’s “business cycle” help determine when information is necessary. Outside help, in the form of an accounting firm professional or business consultant can be brought in to help, if necessary. In general terms, any data that is key to the operation of business that week—cash flow, revenue generation, and profitability—needs to be communicated in real time.

Key data could range from an update on a large proposal, to the delivery of an order to collections and payments. Set expectations among the staff about what information needs to be communicated immediately. With many software packages, reports can be generated daily in areas such as daily sales, inventory levels, and cash flow. Network various departmental software to accounting software: If a retail company’s point-of-sale system can’t interface with its accounting software, major efficiencies will not be realized. Software handling inventory, payroll, daily purchasing, accounts payable, and receivables, among others, should all be able to communicate with the accounting software. Internal IT personnel, as well as outside IT consultants, can help solve these issues. Additionally, the software firms themselves want businesses to maximize the usefulness of their packages, and are often willing to provide expertise here. In many cases, reports can be downloaded to Excel for more analytical power.

The old expression “whatever doesn’t kill you, makes you stronger” certainly applies to small businesses over the last 18 months. Successful businesses have been forced to become more efficient and effective in a number of ways, including how they operate. With less room for managerial error, it is key for business owners to have access to vital information to make informed and timely decisions on just about every aspect of their business, including production, cash flow, new business generation, and delivery of products. The management of cash flow and profitability, and the ability to adapt to the ever-changing business environment is key to a business’s success.