3 Essential Business Monitoring Methods
“How Are You Doing … And Why?” The Secret to Business Success
By Jon Orr, Managing Director, Optimas Financial & Accounting Solutions
Imagine your car is giving you trouble. You decide to change the air filter to see if that works. It doesn’t. Then you replace the fuel pump. None of it helps, and eventually the car dies. Unfortunately, it turned out you hadn’t checked or changed the car’s oil in over a year.
You would never really do that to your car. However, many business owners are doing something similar to their businesses.
Managing your business without fully understanding the source of opportunities or problems results in unnecessary costs and lost profits. You can improve your profits and cash flow with proper business performance monitoring.
Go Deep with Business Performance Monitoring
It may be relatively easy to identify effects of issues in your company but harder to discover the cause of those problems. For example, if sales are declining, is it because of challenges the sales team is facing or are there issues with production, marketing, or pricing? Determining the exact cause of every misstep is vital to the health of your business.
So, how do you take stock of your company and analyze its challenges?
3 Ways to Measure Performance
If you measure it, you can manage it. Determining what you will measure and how you will measure is very important to proper business monitoring. A fact-based analysis of the data will help you further focus efforts on only the most successful tactics. Steady measurement also makes it crystal clear where to aim for improvement.
Below are 3 methods of monitoring your business’s performance. Proper monitoring will likely include all methods.
Benchmarking. This is a technique of comparing your business performance against your competitors. For example, your business may be growing sales at 1% annually and your competitors are growing at 5% annually. As a business manager, you will want to investigate why your competitors are growing faster so that you can make adjustments.
Variance Analysis. Variance analysis is used to monitor actual costs, revenues, and budgets against your original estimates. By looking at variances in budgets and forecasts, a business manager can make adjustments to get back on track and improve future forecasts.
Trend Analysis. There is a saying that one month doesn’t make a trend. Yet many businesses only look at their performance over one particular period. This makes it difficult to see bigger issues that may be accumulating over time. Look at trends of expenses and ratios over several periods (for example, 12 months, 8 quarters, 2 years, etc.) and investigate negative and positive trends.
For more information on measuring and monitoring, see What Key Performance Indicators (KPIs) Should I Track?
Let the Experts Help
Often, business owners and managers don’t have the time, expertise, and resources to implement proper monitoring and keep these reports updated. To avoid missing out on the benefits of monitoring, bring in an outside expert to help your company increase its profits and attain its strategic goals.
At Optimas Financial & Accounting Solutions, we are these experts. We help our clients manage their business operations – and we can help you, too.
Call us at 630-780-1042 or email firstname.lastname@example.org for more information. Get started today on the path to more to a more profitable tomorrow.
About Optimas Financial & Accounting Solutions
Optimas Financial & Accounting Solutions’ (www.optimasllc.com) mission is to provide business leaders with the information they need and deserve. Optimas delivers cutting-edge accounting services and professional financial analysis and advice to small and mid-sized businesses, turning their accounting and finance departments into profit centers. We offer business accounting and CFO services using the latest technology and economies of scale to lower costs and increase the quality, amount, and timeliness of valuable financial information. Our CFO services also provide the expert financial analysis and insight to accomplish each client’s strategic objectives and increase their profitability.
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