34. Are Your Financial Reports Holding Your Company Back
Are Your Financial Reports Holding Your Company Back
Are financial reports a decision-making tool or a question-making tool? The financial reports don't give the whole story. They show the score at a particular point in time, but don't show how you actually played. Where you are winning and what areas you need improving. In this video, I share why you need to use the financial reports with KPIs to uncover the story behind the numbers.
- Hi, today I want to talk about, are your financial reports holding your company back? And so, what do I mean by that? So sometimes, a significant amount of effort and focus is on the financial reports. But sometimes, the financial reports doesn't give the whole story. And so people are making decisions on financial reports, and the financial reports aren't a true reflection on productivity or they're not, maybe that's not the right way to say it, but maybe it's not giving the whole story about productivity in your company.
So let me give an analogy. One of the best analogies to give is sporting teams, because sporting teams they spend their money on making sure they're getting the one percents right. And they do it in a great way. And so, I'm going to use an analogy from a rugby league team. It could be rugby union, or it could even be American football, they probably have their own stats.
But a rugby league team might know that they're going to win 95% of the time, if they get these three things right. So they're completion rate is say how many mistakes that they make, it is going to be less than 15% of the time, so every time they get the ball, they're going to hold onto it, for they're whole set of six tackles that they get, for greater than 85% of the time. Penalties conceded, if they give less than five penalties per game, they know that's going to contribute to a 95% win rate. And missed tackles, if the missed tackles is under ten, then they're going to contribute to a 95% win rate.
This is really an example of a sport where it's based on the team that makes the least amount of mistakes wins. And most businesses are exactly the same. So how does that translate into your business. So if we come back to thinking about financial reports, and thinking about sport. The financial report is really the score at a particular point in time. So if you get to the end of the game, and you see the teams won 20 points to 12, it doesn't really tell you how the team has performed, what are the things that made them win the game? What are the things, that are the things, where a team member may have been sent off from the other team, or there might be something that's happened.
But you wanna go deeper to find out why the team, and why the business is productive. So if you're just kind of looking at your financial reports and then making decisions on that, it's gonna hold your company back.
So lets look at how these things correlate in your business. So completion rate, people. How are the, how are the people in your business? Are they engaged? Do you have a rate, where you're looking at the rate of engagement? I think the Gallup, the Gallop Poll, this is in the US, came out, I think it was 70 or 80% of employees are not engaged. What about absenteeism? What about turnover? These are the things that are critical to your business, and are costing your business money, which you can not see in the financial reports.
Moving on to the next one. What are the critical numbers that you have to get right? In a lot of businesses, I like to see the three critical numbers that your business has to get right, that you must be monitoring all the time. So that may be, quotes sent out, or quotes accepted. It may be productivity numbers. It may be how much waste, it has to under a certain, or re-work has to be under a certain amount. So it's identifying those critical numbers that you've gotta get right, and if they're not right you know your business is not going to succeed.
Systems and Processes
And the last thing is systems and processes. It's having metrics in place so that you know the systems and processes. So, one of the examples, that Darryl gives in one of his talks is about how they reviewed the systems and processes and it was, I think it was going from 70 or 80 days from port to the shop, and how they were able to reduce it down to, I think it was like 14 or something like that, by reviewing the systems and processes. So it's having those days, those measurements in place for how long a process will take, or how long a system will take, so that once you start measuring it, then you'll start measuring it, managing it.
So yeah, I just wanted to give a briefing that that sometimes if, especially for accountants, they can get stuck on financial reports, but financial reports, are not giving the whole story about productivity. And so to make sure that your financial reports are not holding your company back. So thank you very much, and I'll see you in the next round.