By Jeremy Crow, Williams Crow Mask Audit Manager
Is your business headed in the right direction? Here are three questions that can help ensure you’re on the right path:
#1 – Are you measuring and focusing on the right things?
Recently my wife and I decided to have hardwood floors installed to replace the carpet in our home. To begin this project we went down to the home improvement store and hired them as our professional installer. We expected them to handle the entire project, because they are after all, “the professionals”. They came in and measured the rooms and ordered the flooring as expected. But wasn’t expected was that on installation day, they could not begin the work because there was ceramic tile under the carpet. Apparently the people who did the measuring didn’t even consider a major factor in the cost and timing of the project which is the surface the new floor will be resting on.
As a business leader I know that there are so many things that can and often should capture your attention. Things that should be considered as we make progress toward our goals. We often call them Key Performance Indicators (KPIs), key ratios, or even create sophisticated scorecards. This is all well and good, but I believe we need to step back and determine the most important two or three things to measure for your business. What is necessary to achieve a couple of short term goals that help us achieve our one long term goal?
For example, if your short term goals are to 1) win three construction contracts next quarter and 2) hire a new project manager, all in an effort to become one of the top three subcontractors in your trade, then you need to need to figure out what to measure to help you hit those two goals. You might first focus on the total number of projects bid compared to those that were won. This success rate could be tied to rewards for your company that everyone participates in. Another measurement could be the number of qualified applicants reviewed by management for the second goal of hiring a new project manager.
Keep in mind that each of the measurements should keep you on track toward your short term goals that will over time lead to the accomplishment of the long term goal.
#2 – Is your information accurate and relevant?
Returning to the flooring story, if the flooring installer does not measure the square footage of the rooms properly, then there will be a problem of shortage or excess materials and labor. Both of these problems can become costly over time with shortages causing delays and excess materials tying up cash that could be better used somewhere else. The installer’s mistake of not considering the flooring underneath the carpet is a relevancy issue. Not knowing this information cost me more money and extra time in the project.
In your business can you really depend on your accounting team to provide accurate and relevant information? This sometimes creates a balancing act of time resources on the accountant’s part. They could spend all of the time in the world figuring out every detail, but doing so creates a problem which is relevancy. By the time your financial information is perfect, it cannot help you make decisions or correct an emerging problem before it is too late.
One solution to this is to set systems in place to shorten the time of gathering and recording financial information. Work with your accountant to establish an internal bookkeeping schedule and stick to it. You may need to hire additional staff to get things under control. Another tool is to create worksheet templates for financial reporting adjustments that are used on a monthly, quarterly, and annual basis. Ask your CPA for examples to get you started.
#3 – Are you responding to the results?
When we discovered that the flooring installers were not going to be able to move ahead with the project, we had to evaluate our options. On one hand we could pay a lot more money and have them “professionally” remove the tile and then install the floor or change our course pull all of the carpet up ourselves and forget the wood flooring or do the tile removal ourselves.
When you know what you are trying to accomplish and have the information that you need to get there, it is a lot easier to make decisions. This goes back to setting good short term goals that lead to a specific long term result and getting relevant information to keep you on track. At this point you have to decide what to do.
We decided to remove the tile ourselves which created a whole new set of challenges. We had to make sacrifices of time and get advice and tools from people we knew that were experienced in this sort of thing. At the end it all came together beautifully and we learned a few new skills in the process.
What about in your business? Are your results lining you up to achieve your goals? If not, take the time to make the changes necessary to get on track. You may need to ask for skilled advice or get tools that will help you complete the job. It is up to you!