In this month’s Finance Matters, brought to you in association with Saffery Champness, Partner Jamie Lane looks at seven principles to monitor your performance and business goals.

We also get to meet Saffery Manager Amelia Palmer who has a dream to own her own smallholding, or hobby farm, with a herd of alpacas.

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By Jamie Lane, Partner, Saffery Champness.

In an age where accounting software becomes more and more data rich, there is a risk that the data overwhelms the users and becomes meaningless in driving business performance. Many businesses who have robust financial systems and the reporting tools fall into the trap of having too much data and not enough information. Whilst there is no silver bullet, here are seven principles to improve how you monitor business performance that will help management achieve their goals.

Take a strategic approach

The management team should have the greatest awareness of the financial and operational goals. As such they should not accept the basic output of the finance system as a fait accompli. It is natural for finance teams to design systems that make it easy to record transactions. As business leaders you need a system that reports business performance and enables you to monitor progress against goals. Reporting should take a top down approach.

Identify business drivers

A business recently confided that despite initially heading for good financial results, the last few months of the year were disappointing. By the time the management team realised that results were slipping, it was too late to intervene. The management team now receive information on pipeline activity, tender conversions and utilisations across the business, in addition to the bare revenue and cost results. They have gone beyond looking at the financial results to monitoring what drives future results and can identify issues ahead of time.

Can you measure the drivers of your business rather than just the results?

Use key performance indicators

KPIs (key performance indicators) are an effective and brief way to report business performance. The KPIs should reflect performance, be capable of being measured, compared and acted upon. By definition there can only be a small number of key performance indicators. Try to limit the number of KPIs available to the team to between five and nine balanced measures. Just as the overall goals cascade through the organisation and often become more granular, so can the KPIs. Operational management and staff will need to monitor performance in a greater level of detail than the directors.

Make the right comparisons

There can be a tendency to compare performance to last year. Being up on last year can provide a sense of comfort. Firms anticipating change are better served by comparing actual results to targets. For businesses in a growth phase, last year’s results will usually be exceeded. It is more pertinent to know if your business is on plan, rather than simply being in line with last year.

Don’t sweat the small stuff

It is important to recognise the competing pressures of timing and accuracy. Generally, the accuracy of information increases as time passes. For example, management accounts could be produced very soon after a period end and before accurate adjustment for accruals and prepayments, for instance. At the operational level it may be worth sacrificing some accuracy for the sake of speed.

Take a balanced approach

Whether at board or operational level it is important not to focus overly on one aspect of performance. For example, a business that only values the revenue it generates compared to, say, investment in people, may not thrive in the long term. Clearly sales and profitability matter but don’t ignore customer satisfaction, staff turnover, pipeline growth or other non-financial measures which may be key to your future success.

Use consistent presentation

Irrespective of the level of financial expertise at a management team level, using a consistent format for your reporting should improve its effectiveness. Providing a brief commentary in addition to the numbers, graphs etc is also useful. This can drill down into more detailed operational matters to provide appropriate explanations.

Following these principles should improve your reporting and give you information on the drivers of future business performance. Act on this information and it will help you achieve your goals.

To find out how we can assist you and your business, contact Jamie Lane.

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Getting to know our team

Name: Amelia Palmer

Role: Manager

Time at Safferys

I joined Safferys in January 2017 as a school leaver, through the apprenticeship scheme.

What’s the best bit about your job?

I particularly enjoy the variety that my broad client portfolio brings to my day-to-day role. I currently manage a range of clients across a number of different industries and this also involves working for the different audit partners, meaning that no two days are the same.

In addition to this, I am currently helping to drive our school leaver recruitment programme down in Bournemouth. This involves engaging with local schools to attend careers fairs and mock interview events. Providing young people with career guidance and opportunities, as an alternative pathway to university, by sharing my experience and career at Safferys is something that I am passionate about.

The culture of Saffery Champness is really important to the business and the people within it – what do you think you bring to the team and what do you contribute?

I like to think that I am a real team player because I strive to encourage collegiality between both the audit team and the wider Bournemouth office. Not only does this positively impact client service but it also helps to aid the development of more junior members of the team. With regards to the development of staff, this is something that is key to my role and I find investing time into developing the more junior members of the team particularly rewarding.

If you weren’t doing this role, what might you be doing?

A dream of mine is to one day own my own smallholding or hobby farm with a herd of alpacas. Maybe one day this dream will become reality.

What do you enjoy doing outside of work?

My hobbies are all particularly active. At the weekend I can usually be found playing tennis, wind surfing or taking my dog out for long walks.

 Tell us something about yourself that we don’t know

Before my career at Safferys I used to be a full-time swimming teacher, teaching complete beginners through to club level. I have also dabbled in other active roles including teaching sailing, instructing fitness classes and a brief stint as a personal trainer.

Who or what inspires you?

It sounds a cliché, but my grandfather is a real inspiration to me. He is a shining example that if you work hard, you can build the life for yourself that you want.

What’s your favourite place in Dorset?

For me, nothing beats sitting around the harbour in West Bay with a portion of fresh fish and chips, watching the world go by.

Give 3 words to describe yourself

Driven, collegiate, bubbly.