Saturday
Aug252007
Non-financial measures
Saturday, August 25, 2007 at 3:29PM
At a minimum businesses should have financial measures. In their most basic form these financial measures are comprised of a balance sheet, an income statement and a statement of cash flows. We work with many of our clients to build a one page, one year forecast that encompasses all of these. But what happens next?
Businesses are increasingly turning to their CPA's to help assemble non-financial reports that detail progress in areas such as customer service, employee retention, capacity, market risk, etc. What has been interesting is that it is usually the exercise of financial forecasting that highlights the need for these non-financial measures. Those who know me know that I am a big fan of forecasting. That's what our entire mission statement at Axiom is built around. But what most people don't know is that I love forecasting so much precisely because it REQUIRES business owners to understand, explain and predict the non-financial factors that drive their numbers.
Over the next few years non-financial measures will become the buzzword in accounting and CFO circles. The international accounting firms and their consulting arms are already beginning to bang this drum and it's just a matter of time before the message percolates down to small and medium size businesses. However, you don't have to wait to see benefits from this unique way of examining your business. All you have to do is find a knowledgeable CPA and have him or her assist you in building a detailed financial forecast. During this exercise you will ferret out the non-financial details that drive your numbers and you'll have a much better understanding of where your success comes from. The really insightful business owners don't stop at the forecast. They put in place systems to measure these non-financial factors on a regular basis (weekly or monthly). That way they measure and pay attention to the source of success.
Businesses are increasingly turning to their CPA's to help assemble non-financial reports that detail progress in areas such as customer service, employee retention, capacity, market risk, etc. What has been interesting is that it is usually the exercise of financial forecasting that highlights the need for these non-financial measures. Those who know me know that I am a big fan of forecasting. That's what our entire mission statement at Axiom is built around. But what most people don't know is that I love forecasting so much precisely because it REQUIRES business owners to understand, explain and predict the non-financial factors that drive their numbers.
Over the next few years non-financial measures will become the buzzword in accounting and CFO circles. The international accounting firms and their consulting arms are already beginning to bang this drum and it's just a matter of time before the message percolates down to small and medium size businesses. However, you don't have to wait to see benefits from this unique way of examining your business. All you have to do is find a knowledgeable CPA and have him or her assist you in building a detailed financial forecast. During this exercise you will ferret out the non-financial details that drive your numbers and you'll have a much better understanding of where your success comes from. The really insightful business owners don't stop at the forecast. They put in place systems to measure these non-financial factors on a regular basis (weekly or monthly). That way they measure and pay attention to the source of success.
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