Updated: Sep 15, 2020
Over the years, I have worked with clients who manage their business using reports that either track the wrong activities, or which lack information about key performance indicators. By relying on the wrong information, too often the business owner will choose the wrong option when making a critical business decision.
The fact is, as your business grows or changes, the key performance indicators that drive your business will change as well. You will have, for example, new costs to consider, changes in the standard unit used to measure performance, or completely new and different activities to track.
Here are examples of actual client situations where I helped them make this change:
A logistics company moved into an office/warehouse facility so it could add storage services to its clients. At first, the owner only charged a flat fee for storage and his profit margins suffered. Once I showed the owner that he had to account for the cost of each cubic foot in the warehouse that was used for storage, he was able to modify his storage fee and realize an appropriate profit margin.
An agricultural company received its raw material in large bales, then transferred the product into small bags for weighing. The owners tracked the number of small bags used, but only the weight of the material was relevant. Consequently, the company stopped tracking the number of small bags and only measured the weight of the product, which sharply increased productivity and eliminated frequent errors.
A furniture company would mark all returned merchandise as "D" to indicate it was damaged. However, the value of damaged merchandise kept increasing. As it turns out, not all furniture was damaged. Some of the furniture only needed a screw or two to make it stable, while other items could be repaired and sold at a discount. So I worked with the company to modify the coding system to identify items as damaged, reparable, or to be sold at a discount, which led to a lower level of damaged items, and additional revenue from the sale of items that otherwise would have been destroyed.
Try to take time periodically to evaluate how your operations today differ from how you managed your company in the past. Has anything significantly changed? If so, match the reports you use against your current activities and make whatever changes you must to ensure you are getting the right information so you can be fully informed when making critical business decisions that affect the future of your company.