Understanding Business Finances and Results – Part 4
What to do with the information
Throughout our Understanding Business Finances and Results series we have talked about the importance of understanding your business model, covered what Key Performance Indicators (KPIs) are, which KPI’s to measure and how often you should measure KPIs.
If you have been implementing each step you will have systems in place to measure the appropriate KPIs with the appropriate frequency. The final step is to determine how to analyse the information you have to assist with running your business.
There are several ways to do this and listed below are just a few examples:
- Budget vs Actual analysis: Setting targets for each of the KPIs then comparing the actual results to those targets can provide information as to whether the business is on track to perform the way that it is expected. Where KPIs are falling short of target, determine what is causing it and take corrective action.
- Trend analysis: By monitoring consecutive periods and the same period from previous years trends in business performance can be identified and acted upon.
- Outlier analysis: Here we look at all the KPIs as a suite and look for any measures that are not performing in the same way as the others. For example, the number of total washes was consistent over time but in comparison the Sales figures were increasing and the percentage split between Standard and Deluxe washes was increasing for deluxe washes. This is good news with regards to customers buying the more expensive service but not so good news in that Net customer growth doesn’t appear to be happening. Therefore, marketing efforts could then be directed towards new customer acquisition.
So, you should now be armed with enough information to make informed decisions based on what is happening in the business.
This concludes our series on Understanding Business Finances and Results. If you require support analysing your business results or if you would like to review how your business is currently performing and discuss strategies that can have a significant impact on your business please take our online business improvement assessment, speak with your usual Hanrick Curran advisor, or alternatively call Robert Pitt on 07 3218 3900.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.