We live in a digital age. There is more information at your fingertips than you can even imagine. However, it’s important not to let your need for facts freeze you into inaction while you wait for the next detail. Business information technology can produce a multitude of reports telling you how every penny was spent and every second was utilized. How do you focus to prevent inaction?
The first step to avoiding information paralysis is to require your information system to do its job. You use your system to generate reports to satisfy the regulators for income, excise and sales tax and collateral; however, the most important function of your information system should be to provide you with the right information to drive your business. How much information is this? Well you would probably like to have about the same amount of information about your business as you do to run your car.
When you take your car into the dealership they use their information system to diagnose it. It can print out reams of paper to let you know everything from how well it is performing to the fact that the you have a parking light out. It is all great information but it is not what you need to drive your car. What you need to know is — is there enough fuel, how fast are you going, and what are the directions to get you where you are going. You also have lights that warn you if the engine is too hot, the oil too low, or if it is time for an oil change or tune up. This information tells you what you need to know to have a very successful car trip.
In much the same way, you need a “dashboard” that identifies the key drivers that help you run and grow your business. That way when you get your daily, weekly or monthly reports you will immediately be able to diagnose your business. Is it on tract? Do you have any red lights that need immediate information? If set-up successfully, it can take as little as five minutes to keep your business moving forward.
Getting to this point can take some thought and planning. What are your key drivers to keep your business on track and moving forward? Important business drivers might be: cash balance, accounts receivables with days outstanding and a list of payables. The dashboard should also include key production drivers such as units produced yesterday, units sold, break-even analysis, etc. Your dashboard should be unique to you; they should include the key pieces of information that you need manage your business. And they should be individualized based on the nature of your business and your management style.
The dashboard can help you to quickly focus your attention on the areas that need it. There are a few things about the dashboard you should note. If a warning light comes on don’t ignore it. The diagnostics are there for a reason to help you find the problem and resolve it as soon as practical. And that might mean going back to the detail to find out the root cause.
To learn more about how to build the right dashboard for your business contact Don Towle or your MarksNelson professional today.
Any tax advice contained in this communication (whether distributed by mail, e-mail, fax, or other means) is not intended or written to be used, and cannot be used, by any person for the purposes of avoiding any penalties that may be imposed by any government taxing authority or agency, or for promoting, marketing or recommending to another party any tax-related matter addressed herein.