We have entered the season of counting: counting down to Christmas, the countdown to the New Year, counting resolutions, and other accounts.
For business owners, add this to your to-do list: your performance this year.
Your balances, your volumes, your profit or loss; the close of the year is a time to take stock of your annual performance, comparing it with plans you set at the start of the year.
What does not get measured cannot be managed.
You should be reviewing your financial performance regularly but year ends provide a good occasion to review your business performance critically.
You can step back from the trees to see the entire woods. Here are a few ideas you could consider:
What was your overall business performance like this year? Was it better or worse than you expected? What were the business drivers? What were the hindrances?
If you want a repeat of successful performance, you must identify the success factors, and to improve on poor performance, you must isolate slugging factors.
Now, breaking down your overall performance into segments, are there specific patterns you can tease out from your business performance?
For example, if you are into selling umbrellas, you may observe an increase in sales during rain (no surprise there!). An interesting observation though may be an increase in sales volumes in dry seasons.
What might have caused this unexpected occurrence? Could it be that your customers, taking advantage of your off-peak discounts, bought more umbrellas?
Or maybe your customers found alternative uses for your products, say, to shield themselves from the sun? Whatever the reason, establishing the cause would help you in planning targets for the coming year.
Another reflection could be on your balances: cash reserves, inventory, your debtors and so on. What do your balances tell you about your business?
Are you operating (in)efficiently? Perhaps you could take advantage of economies enjoyed by keeping large balances? Maybe you are underutilising your balances, or trading-off profitable opportunities for safety? Reflect on these and chart a way forward.
There are myriad indicators you can choose to look at; these are just examples to warm you up for your year-end reflection.
Therefore, count your pennies, take a headcount, count your inventory, count your losses… Use insights from your numbers to create goals for the new year. Whatever metric you decide to focus on, be sure to make it count.
The author is the Finance and Strategy Lead at Red Beryl Consulting.