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msi_-_business_performance_reporting_-_2By Paul Bunting, MSI Ragg Weir, Accountants, Melbourne.

With the introduction of the GST in 2000, Australian business widely adopted the use of technology to maintain their records and prepare their financial statements. This brought many benefits including the timely availability of profit and loss statements, balance sheets, bank reconciliations and debtor and creditor records. However, the available information is often locked away in a computer and is rarely extracted and used for management purposes and decision making. And yet, with little additional effort, businesses can easily extract important information on a monthly basis and summarise it on one page. That one page summary is beneficial, particularly in discussions with management and at business decision meetings.

The information that should be extracted will vary for each business but it should be relevant and based upon the items that will provide a view of likely future performance, past performance and what is happening in the business today. These key items of business information can be summarised on one page, showing the results for each month of the financial year, to reveal a monthly snapshot and a trend for the year. These items are often referred to as key performance indicators (KPI’s) and there is a saying that ‘what gets measured gets managed’.

Examples of the types of information that can be included are:

  • A summary of the profit and loss for the month including items that are relevant for the business. (e.g. sales, costs of goods sold, labour costs and overheads).
  • Bank balance
  • Debtors owing
  • Creditors owed
  • Stock levels
  • Value of debtors over 90 days
  • Bank loan balances
  • Sales orders received for the month where there is a lag between their receipt and the manufacture of the goods and invoicing
  • Forward book of work
  • Days lost due to injury if safety is an issue
  • Google searches of your business by external parties

The value of the one page summary document is gained by applying it consistently and constantly to your business strategy and decision making. There is no point in preparing the document and ignoring it.

The steps you should take to implement a one page business performance summary in your business are:

  • Commit to having your accounting software regularly reconciled and accurate
  • Consider what the important KPI’s are for your business.
  • Put in place a methodology for measuring the items not available from your accounting software
  • Appoint a person to prepare the document.
  • Prepare the document
  • Have the document at your management meetings
  • Set aside time on the regular monthly management agenda to consider the document.
  • Discuss its content
  • Consider how you can improve the document.

Importantly, business owners and managers set up their one-page performance summary with ease – either on their own or, to reduce the learning curve and identify the best KPIs first time, with the assistance of their local MSI member firm.

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