Do you have a standard of measurement to see how well you are performing in business? The questions you need to ask yourself are ‘what’ should I be measuring and ‘how’ should I be measuring them.
What you measure in business, matters!
When tracking progress towards a goal or even if you’re only checking in to see how you are going, how you measure matters and will hugely impact the insights you draw.
To put this into perspective, imagine you have a goal to lose 3 kilos.
Now imagine that you’ve worked with a professional and have a healthy eating plan and workout regime. The plan is simple, eat well, work out and if all goes to plan you should lose a kilo a month.
On day one you weigh yourself.
You follow your plan meticulously.
On day 30 you weigh yourself…..you’ve put on 4 kilos!
Our immediate thoughts go towards the plan and what was done in the last 30 days, but how you measure matters.
A deeper analysis reveals that in the example above that the first weigh in was first thing in the morning with minimal clothes and the second weigh in was after dinner whilst wearing your thickest winter coat.
This is an over exaggerated example, but if we don’t follow best practices and measure in a consistent way, then we can end up with measurements (ie results) that do not give us meaningful insights into the effectiveness of our actions and progress towards our goals.
At worst, our results can be inaccurate and misleading resulting in us thinking that we are doing better than we actually are or worse than we actually are.
This is also true of your accounting file. Keeping your accounting file accurate and up to date allows for meaningful insights to be drawn. A basic example would be not recording an upcoming expense, which will overstate profit.
If you’re struggling to make sense of your financials, the question to ask is, how confident are you that your accounting file is correct.
Running a business is not easy, being successful is even harder!
When it comes to determining how well you are performing in business, you need to have a standard of measurement.
The questions you need to ask yourself are ‘what’ should I be measuring and ‘how’ should I be measuring them in order to determine if your on track or off track.
- Have an outstanding finance function: Accounting files and dashboards
- Set Goals: make sure they are clearly defined, make sure they are timed
- Set Key Performance Indicators: make sure they are specific, measurable, achievable, relevant and time-bound
- Track and measure: figure out what areas of your business need metrics assigned to them – numbers don’t lie!
Remember - How you measure matters and will impact the insights that you draw.