Jim Schell explains how to create a key indicator report
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This is an excerpt from Small Business School.
Hattie: Jim teaches business owners to develop what he calls Key Indicators. He has 11 generic key indicators that work for every business, but it also has each owner come up with one that is specific to their business.
Jim: Each month you’re going to generate a cash flow statement, a P and L, balance sheet and a key indicator report. What is a key indicator report? It’s just what it says. If you’re going to pick anywhere from eight on up key indicators that are peculiar to your business, and when I say eight on up the key indicator report is a living breathing document and it changes. And so you’re indicators and your business might change as you grow, as different happens so first remember that a key indicator report is not a generic report it’s a growing and it’s different for your business and it is for anybody else.
Basically, what it does is capture the key, percentages, ratios and relationships of the numbers that come out in your P and L, balance sheet, cash flow statement.
Hattie: This is Jim’s generic list of key indicators. From your P and L you get profit for the month, profit year to date, sales for month, sales year to date, return on sales year to date, salaries and wages as a percentage of sales. Then in your balance sheet, you get current ratio, debt to equity, inventory, account receivable, percentage of receivables over 60 days.
Chris what do you consider to be your key critical indicators. What numbers tell you if you’re doing good or bad?
Chris: Critical indicators. The way I inventory is selling versus the previous year. Our cash received well for sure and our collection on that.
Hattie: So accounts receivable, inventory, what about sales?
Chris: Definitely sales.
Chris: Our daily sales to the register and our sales are the way our employees are scheduled what work we can get to. People are coming and asked us to do stuff.
Hattie: How often now with the new system you’ve been installed? Do you look at your key indicators?
Chris: We’d look usually if not daily. It depends on my workload at least once a week.