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October 2012
Performance Data for Better Business Decisions
By Michael Waddell

     Most small business owners and managers are acutely aware of how their company is performing on a daily or weekly basis. In addition to leading the company, many also process customer orders, create invoices, post payments, make bank deposits, and sign checks for employees and vendors.

     As they perform these tasks, they receive updates about daily sales volume; current cash; accounts receivable and accounts payable balances; inventory levels; line of credit balances; and so forth. This keeps them informed about the company’s overall performance, so they are better able to identify issues and react quickly.

     As small businesses grow, employees are hired, and owners and managers pass duties to others. As tasks are delegated, however, leaders may also lose their full view of the company’s current performance. They may still receive weekly sales reports or a daily cash balance information, but this information only highlights a few segments of the business.

     For the full view, the owner or manager may rely on the month-end financial statements, but these provide a historical picture that can be several weeks old. Instead of observing current performance, these managers look backwards.

     Today, most business or enterprise software systems offer management dashboards or executive summaries to help owners and managers understand current business conditions. These are usually reports or screens within the software that consolidate data and give real time, high level views of important information.

     These executive summaries can be very useful, but they can also be frustrating if the data is too limited or hard to understand. There may also be important information outside the software that cannot be added to the software-generated dashboard.

     For a small or mid-size company, building your own executive summary may be a better alternative. You can create a management dashboard, using a spreadsheet, which can be customized for your specific needs. It can be easily updated and provide a full overview of the company’s current performance. Below is an example and several useful tips:

     Keep the report short and simple. Create a report that fits on one printed page. You should be able to quickly review the report and easily understand the information.

     Focus on the basics and only include high level data. Include 10 to 25 key items that you need to make good decisions, and exclude unimportant details. If the summary figures suggest a problem then research further.

     Combine financial and statistical data. Balance sheet and income statement summary data should be combined with other statistical data, for example: number of employees, quantities produced, overtime hours worked, etc.

     Compare with past periods. Comparisons show if your performance trend is better or worse.

     Share the results. Talk about the data and the trends with other managers and employees. Executive summaries should include the company’s most important performance data, so discussing this information reinforces, to everyone, those factors that are important.

     Executive summaries or management dashboards highlight current business conditions. Unlike monthly financial statements, an executive summary includes only the most important factors driving the business. High level information is gathered, consolidated and shared several times each month. Owners and managers stay informed about current operations and have a real time tool to help manage future business performance.


Michael Waddell is a Financial and Management Consultant at Potter & Company.
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