As an entrepreneur you may have prepared a business plan or may be in the process of preparing one. What about an action plan? What about the results of your actions? Have you reviewed the results of your actions on a regular basis? In fact, many times, start ups miss out on this aspect, thus missing out on signals, that something that has been planned is not working out. Regular capturing, monitoring and analysis of data can help.
In my first post in this blog "Thinking about the how and why of costs" I had mentioned one Bangalore Company in which advance collected was spent by the CEO who assumed that surplus was being earned. This issue did not come to light until it was too late for the CEO to take any corrective action. This could have been avoided if simple steps could have been taken to maintain a list of advances collected from different clients, along with spends against these and estimates for future expenses.
In fact, a number of companies do not capture key data on a regular basis. In the past, one would justify this and say that data analysis was difficult as it was to be manually collected and collated. In today’s times, we have the advantage of technology which can be used to capture data on a regular basis.
Below are some indicative parameters in an MIS (Management Information System) /Flash report where one could capture the Key Performance Indices (KPIs) in a business. Key data could be collected on a monthly/fortnightly/weekly basis.
- Sales
- Expenses – key heads
- Number of employees
- Average revenue per employee
- Average cost per employee
- Receivables
- Payables
- Cash balance
- Key Assets
- Loans outstanding
- Equity capital
- Number of customers
- Quality of revenue – in terms of product/service/vertical/location etc
- New customers added
- Customers lost
- Pipeline customers
- Etc… to be refined based on the nature and size of the business
Of course, capturing data is only the first step; it is necessary but not sufficient, to be of value to the entrepreneur. The key is to look at the numbers on a regular basis and analyze this; to look for patterns and trends; to understand variances; to compare with benchmark companies etc. Over time this will build up as rich data and will help one get a better understanding of how the business is evolving and whether expectations are being met or… exceeded! This can help in deciding on the next steps and in… the Action Plan.
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Very apt. I think there is a lot of talk about the plan. But the emphasis should be on PDCA – Plan, DO, CHECK, ACT cycle. The Tally package provides all these items that you have discussed about. The problem happens when a technepreneur focuses more on the product creation and relies more on accounting clerks – they may be called managers, he misses out on designing the MIS required for review. A simple excel sheet, where in sales is broken down into indivual heads, cost (direct, salaries and others) is marked against these same heads and revenue realization – that is when the money actually comes in after sales, can give a very good insight in to the cash flow. And this needs to be checked week on week – especially if it is a bootstrapped company like ours.
Good luck – krishna , eilabs