Originally posted at Cirillo Hooper & Company
Personally, I shudder every time I look at our profit and loss statement. So much so, that I don’t even bother looking at it any more!
Why?
Because it is a historical document, it tells you what happened, I already know what happened, I was there! I want to know what’shappening and what is going to happen. Traditional accounting reports do not give me the business intelligence I need to make important business decisions.
This is where Key Performance Indicators (KPIs) and real-time-accounting come into play.
First, KPIs: Every single team member including working owners need to have ‘key performance indicators’ tailored specifically to their contribution to the business. KPI performance can be known as either a leading indicator or a lagging indicator. We want leading indicators because the help us predict the future. One classic example of a leading indicator is ‘number of prospect meetings per month,’ if we have a good idea of the conversion rate then we can estimate the number sales that are going to flow into the business in the future. I won’t dwell any further on the subject of KPIs, it is a discussion for another article.
Next, I will go onto real-time-accounting. We use a cloud based accounting platform called Xero. What is great about Xero is that is synchronises to our company bank accounting daily. This allows us to know exactly where we are at this point in time. This is great to know, and is so much better than waiting for reports that come monthly, quarterly or heaven forbid annually.