Tag Archives | drivers

3 Questions Your Banker Wants Answered

3 Questions Your Banker Wants AnsweredRecently, I had lunch with our banker.  During the meeting, I asked her what she wanted to accomplish when meeting with her customers.  She said that she wanted to know the 3 questions your banker wants answered…

3 Questions Your Banker Wants Answered

1.  How are you feeling about your business and the local economy?

Have you felt the impact from the changes in the local economy and, if so, were they good or bad?  Has there been any fallout with your customers?  How are your competitors reacting?

2.  What is the outlook for the rest of the year?

Do you see the local economy getting worse, recovering, or staying flat?  What forces or drivers do you see influencing your outlook?  What local indicators are you watching?

3.  What are you doing about it?

What actions have you already taken to address any impact?  Have you identified your next steps?  How will those actions impact the financial statements?

In establishing banking relationships and making loans, bankers look to the 5 Cs of Credit for guidance.  The most important of those Cs is Character.  Character covers not only your personal character but also your business competence.  It also covers your management team.

When market conditions fluctuate, bankers want to know that you and your team are strong enough to navigate the rough waters until the economy recovers.

The challenge for business leaders is to be optimistic without being naive;  realistic without being pessimistic.

How are your conversations going with your bankerLeave us a comment below.

Now’s the time to really think like a financial leader. Download our three best tools in the company to start speaking the CFO language.

3 Questions Your Banker Wants Answered

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3 Questions Your Banker Wants Answered

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Using Flash Reports to Improve Productivity

In today’s fast-paced business world, most companies use some sort of dashboard or flash report to monitor and improve productivity and other key performance indicators.  Despite their wide use, many are still confused on what exactly should be measured and what constitutes a key performance indicator.

Using Flash Reports to Improve Productivity

What often happens is the CFO/Controller throws in any indicator that might be important just to cover their bases.  Unfortunately, the report may become too detailed to prepare quickly. And it will loose its usefulness. Eventually, either you stop producing the report or the CFO or Controller only looks at it.  In order to drive productivity, all key team members must review the report and take action on the results.


Start your Flash Report today with our Flash Report Tool – available for only $9! This tool is what we use with every client. Learn more about how you can access it here.


Here’s a helpful video of three things you should know about preparing a flash report.

1. Measuring Productivity Is Often The Most Important Section

When you identify 2-3 measurements in volume, you can have an exponential impact on your profitability. Although measuring productivity is the most difficult part in a flash report, get operations involved to get the key drivers they use to run their part of the business.

2. Go Back to the Financial Projections to Identify the Drivers

In building the financial models, you have already identified the drivers connected to profitability. By performing a sensitivity analysis on those key drivers, you can identify the most impactful drivers in your company. Limit the number of drivers to 2-3.

3. Give the Flash Report to Everyone in the Organization

Most companies limit the flash report to the top management in the company. Instead, give the flash report to everyone in your organization. Let them know how each employee can personally improve profitability and their job performance.

If you want to learn more financial leadership skills, then download the free 7 Habits of Highly Effective CFOs.

Using Flash Reports to Improve Productivity
Using Flash Reports to Improve Productivity

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Key Performance Indicators (KPI’s)

See Also:
Flash Reports
Normalized Earnings
Continuous Accounting: The New Age of Accounting
Collection Effectiveness Index

Key Performance Indicators (KPIs) Definition

Key Performance Indicators (KPIs) are defined as the key drivers of economic activity for a company In essence, KPIs measure the productivity of an organization. By performing a key drivers analysis of the most important business activities that drive profit and cash flow you can then develop a set of key performance ideas. Included in your key drivers analysis should be a sensitivity analysis of your financial projections in order to identify the key financial drivers. The best way to manage and report KPIs is through the use of Flash Reports.

(Find out why KPI’s are important!)

Key Performance Indicators (KPIs) Metrics

Key performance metrics should include both financial and operational metrics, as well as, combinations of the two. Key performance measurement is as much an art as a science. The actual numbers themselves are not as important as the trends in the key performance measures. By combining financial measurements with operational performance measurements you can gauge the productivity of an organization.

Key Performance Indicators (KPIs) Calculation and Examples

KPIs measure productivityProductivity can be expressed as:

    Throughput    

Resource

Examples of throughput would include the following:

  • lbs concrete poured
  • widgets produced
  • # of invoices or tickets written
  • product shipped

Examples of resources would include the following:

  • man hours
  • # of full-time equivalent employees (FTE)
  • cubic feet of warehouse space
  • machine hours

So, in order to calculate productivity over a period (expressed as a KPI), we would take a measure of throughput such as widgets produced and divide it by a resource such as machine hours.  The resulting KPI would be widgets produced per machine hour.

Examples of key performance indicators (KPIs) would include the following:

Key Performance Indicators (KPIs) Dashboard

KPI reporting should be done on a daily or weekly basis. Furthermore, you should prepare a key performance indicators dashboard on the shortest timeframe feasible. The KPI dashboard should be easy to prepare and not take more than thirty minutes to generate. If it does, then you are making the process too complicated. A template should be used to generate the key performance indicators. This template should enable the CFO to identify both positive and negative trends.

Key Performance Indicators

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Access your Flash Report Execution Plan in SCFO Lab. The step-by-step plan to create a dashboard to measure productivity, profitability, and liquidity of your company.

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Key Performance Indicators

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Business Drivers

See Also:
Business Driver Example
Value Drivers: Building Reliable Systems to Sustain the Growth of the Business
Cost Driver
Market Positioning
Are You Collecting the Data You Need to Run Your Business?
Financial Position

Business Drivers Definition

Business drivers, defined loosely as the main factors and resources which provide the essential marketing, sales, and operational functions of a business, are of paramount importance. As more of an art than a science, business drivers are analyzed by consultants and owners alike. Though no single formula or theory dictates success in business, many best-practices exist which can lead the founder of a firm on the path of success and profit.

Obviously, the business drivers in healthcare will be fairly different than those in a retail clothing store. A useful tool to measure and manage business drivers is a Flash Report!

Having a flash report is an easy sign that you’re a financial leader! If you don’t have one yet or want to improve your flash report, download the 7 Habits of Highly Effective CFOs for free AND get an exclusive invitation to join ultimate CFO resource!

Business Drivers Explanation

Business drivers, explained as the crucial factors which lead to success in business, are more of an art than science. These factors differ widely depending on the industry, scope, and other market dynamics. The success factors of one business may directly account for the failures of another.

Examples

For example, if a company provides software development, their success factors will be distinct to the information technologies industry. Success may rely on the ability to stand out among similar firms. Examples of this include solid customer service, quick delivery of projects, and technical support. Marketing, likewise, would use the tools of this industry. These might include the following:

  • Direct sales
  • Referrals from previous clients
  • Pay per click advertising
  • Search engine optimization
  • Attendance to major programming conventions

Conversely, the success of a law firm would leverage completely different factors. Operational matters like customer service, project management and delivery, and others may stay the same though emphasis may be placed on thoroughness rather than speed of delivery. Marketing, however, would be completely different: membership to business networking circles, business radio sponsorships, and most of all referrals probably account for more sales than web marketing can supply.

Business Drivers Vary

Due to the fact that business drivers vary immensely, hire a consultant with a specialty in the industry of interest. These experts know the struggles, failure, and success factors far more than a person with experience from an unrelated industry. Networking alone will flush out these experts from the events they regularly attend. If you want to find out how you can become a valuable financial leader, download the 7 Habits of Highly Effective CFOs for free.

business drivers

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Access your Flash Report Execution Plan in SCFO Lab. The step-by-step plan to manage your company before your financial statements are prepared.

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Business Driver Example

See Also:
Business Drivers
Planning Your Exit Strategy
Selling Your Business to a Private Equity Group
Leadership Action Plan

Business Driver Example

Look at the following business driver example. Dan is the owner of a startup web development firm. He has done his initial research, written a business plan, and is prepared for the operations of his business. Now, Dan needs to understand the business drivers of software development. Understanding the business drivers can give an owner a better overall understanding of their company. In other words, the more knowledgeable an owner is about the inner workings of his/her company, the more successful his company has the capability to be.

To do this, Dan begins by finding all the reading materials he can. He studies technologies, operations, human resources, and most importantly marketing and sales. Dan is attempting to discover the business drivers for enterprise architecture. He is on the path to achieving this goal.

Meet With Experts

Next, Dan attempts to meet experts in the industry. He starts with those who are close to him: family, friends, and college acquaintances. Then, he begins to find and attend networking events related to his industry. In these places Dan will flush out those who truly know about the business drivers in software development.

Dan has found information as well as experts in both operations and marketing. Now, Dan must find experts in financing his firm. He attends banker’s organizations, venture capital networking events, and his local angel investors conference. Dan, due to the assets he holds, has settled on a bank loan as his method of financing.

Conclusion

In conclusion of this business driver example, Dan’s future seems bright as he paves the way for his success. By constantly studying the business drivers, software development success is only a matter of time. He prepares for the future, resolves to save cash as best he can, and aligns his thoughts for his future.

If you want to find out more about how you could utilize your unit economics to add more value to your organization, then click here to download the Know Your Economics Worksheet.

business driver example

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