On a
doctor’s visit, the first thing the nurse does is take your vitals: your temperature, blood pressure, pulse rate,
and respiration rate. These basic
measurements are the first place doctors look to see if something is wrong with
our health.
Knowing
your vital signs, and especially when they are out of whack, is good for your
health. In the same way, knowing your
business’s vital signs, and especially when they are out of whack, is good for
the financial health of your business.
Vital Measures
If
you’ve been in business a while, you might already know the “vitals” you like
to track. Here are some common ones for
a small or new business:
· - Checking
account balance(s)
· - Amounts
owed (bills, payroll, and loans)
· - Revenue
for the month and year-to-date
· - Sales
by customer so you can see the top five to ten largest customers
As time
goes on and your business grows, you may want to add some of the following:
· - Revenue
for the month and year-to-date compared to last year
· - Net
income for the month and year-to-date compared to last year
· - Days
Sales Outstanding which is a measure of how long it take to collect on an
invoice from a client
· - Revenue
by service or product line in a pie chart
These
are just a handful of the many options there are when it comes to measuring the
results of your business, and it would be difficult for us to list all of them
here. The point is to decide proactively
what you’d like to track on a monthly basis.
Then you can set up the process it takes to get those numbers delivered
to you in the format you prefer.
Once
you decide on the numbers you need to run your business, you’ll be able to take
your “vitals” whenever you want. But you
can take this to the next level with one more idea: exception reporting.
Being Exceptional
It’s
great to glance at your numbers periodically, but there can be a lot of data to
wade through. How about getting a report
that tells you only when the numbers go out of range? This is called exception reporting, and
requires that you set ranges for each measure you want to follow. If the measure stays within range, you do not
have to be alerted. However, if it falls
out of range, then you can get a report to tell you what’s going on so you can
take the right business action.
Exception
reporting is not all that common in small business, but can save a busy owner a
lot of time.
A Clean Bill of Health
By
determining the vitals you want to watch for your business and putting a
process in place to monitor that information, you will be helping your business
stay healthy. If we can help, please
reach out and let us know. The doctor is
IN.
