BUSINESS Tools For Managing Your Business: Tracking And Measuring Performance But I Am the Owner and Know Everything Going On Just keep telling yourself that, if it makes you feel better! Many owners of established businesses like to believe that we know everything that is happening in this business. The truth is that, too oſten, this is more of an aspiration than a reality, in at least some areas. What’s the downside? If your data confirms what you already believed to be true, there’s no harm done. But you should still track the important indicators, looking for subtle trends that can serve as early warning radar, alerting you to changes that may be too gradual to notice in your busy daily schedule. Few things in your business will open your eyes more than tracking business barometers, a.k.a. key performance indicators (KPIs). It doesn’t matter whether you are just getting started and using a simple system for your new business or growing your established company with the help of accounting soſt- ware. Decide what to collect and how, collect the data, track the trends and your effort will prove to be a good investment. You will learn something new! Capture Important Data Directly in Your Source Documents. Even with computer soſtware applications to help with your bookkeeping, accounting, sales and business operations, it’s use- ful to capture at least some fundamental tracking information details in your source documents using your business forms. In other words, your forms such as work order, invoice, etc. should be designed to easily facilitate gathering important ba- sic information and data when taking the order, scheduling the work, while at the job site or shortly thereaſter. Use simple checkboxes on the forms (where appropriate) and, better yet, do it electronically if practical. Now that we have beaten this topic to death, let’s look at how we can set up a simple tracking system. What to Track Let’s look at some potential tracking areas for our business. Many activities can be useful to track but we need to consider how difficult, time-consuming or costly it may be to gather this information, versus the benefit derived from having it. Minimally, you should track the business barometers/drivers that follow, because they have significantly different implica- tions. Ultimately, you should track and measure performance indicators in a manner and format that’s best for your business. In a service business, fundamentally, there are four primary kinds of sales/revenue generating activities that can be useful to track and monitor: 26 KEYNOTES JULY/AUGUST 2019 1) Product Sales: a) Sales/revenue dollars billed b) Number of jobs/sales Average dollar revenue per sale = (a/b) - product sales 2) Installation/Repair Sales: a) Sales/revenue dollars billed b) Number of jobs/sales Average dollar revenue per sale = (a/b) - installation/repair sales 3) Service Charge Sales: a) Sales/revenue dollars billed b) Number of jobs/sales Average dollar revenue per sale = (a/b) - service charge sales 4) “Other” Sales: a) Sales/revenue dollars billed b) Number of jobs/sales Average dollar revenue per sale = (a/b) – “other” sales Once we have the above sales data for the four categories, we can add them all up for a sum or total sales, also known as con- solidated sales. We’ll do the same for total number of jobs/sales. a) Total (all) sales/revenue dollars billed b) Total (all) number of jobs/sales Average dollar revenue per job/sale = (b/a) - total (all) sales All of this will become clearer when we look at Figure 1. The blue font means inputs needed. How Often Do We Need to Track and Monitor? While at first it may seem like overkill, the data for each of the categories above should be captured and recorded daily, with monthly summaries and finally, annual summaries. Although data from just a few days in a new month won’t be very tell- ing, we may begin to see early indicators of an emerging trend. Holidays, foul weather, seasonal fluctuations and any other unusual business volume influences or interruptions, should be recorded and considered. Using a Tracking Form If you are unable to generate reports directly from your accounting soſtware, using a simple spreadsheet model can be very helpful and efficient. But you can create your own forms and do this manually, if necessary. The best approach may be generating the raw daily data in reports directly from WWW.ALOA.ORG
