by MHolland | Oct 30, 2024 | Business Tips, Selling Tips, Systems
A family business is more than a company. It is legacy, values, and generations of demanding work. It is unique. And just like every family is different, every family business has its own way to define success. So how do you know if you are on the right path?
Key Performance Indicators (KPIs) can help. KPIs keep your business on track. They are like the dashboard in an aircraft. Without KPIs you are flying your business blind.
Why KPIs Matter
KPIs are your business’s health check. They are the numbers that tell you if you are thriving or just getting by. They give you focus. They drive decisions. Think of KPIs as the vital signs of your business. With the right KPIs, you will know where you are winning and where you need to improve. Every business and organization needs this insight.
Step One – Align KPIs with Goals
It starts with a simple question – what is your 3-year Vision? Where do you want to go?
For some, it is growth – it is increasing revenue.
For others, it is improving efficiency or customer loyalty.
Your KPIs should match these goals. No random metrics. If your goal is growth, measure revenue or profit margins. If your goal is customer loyalty, look at repeat sales or retention rates.
Every KPI should connect back to what matters most. This keeps you focused and cuts out distractions.
Step Two – Make KPIs Measurable and Clear
Numbers matter. The best KPIs are specific and measurable. Think percentages, timeframes, or raw numbers. For example – “Increase monthly revenue by 15%” or “Reduce customer complaints by 25%.”
These are clear. They are easy to track and easy to understand. Avoid vague goals like “Improve customer service” without any numbers. Specifics matter. The clearer the KPI, the easier it is to measure it.
Step Three – Get a Good Mix of KPIs
KPIs should be balanced. A good mix looks at the big picture.
Financial KPIs like net profit or gross margin are crucial. But they are not the only numbers that matter.
Customer satisfaction, employee turnover, and process efficiency matter too. Each tells a part of the story. Financial metrics show profit and cash flow. Customer metrics show loyalty. Employee metrics show team stability and morale. Together, these KPIs give a full view of your business’s health.
Step Four – Keep KPIs Realistic
Ambition is great but keep KPIs achievable. Aiming for the stars is fine, but do not let it become unrealistic. Unrealistic KPIs can lead to burnout, disappointment, and poor decision-making.
Think about why you are in business in the first place. Most people go into business for freedom. No one wants to be a slave to your business. Do you?
Start with reachable goals and increase gradually. If you are tracking profit margin, aim for a 5% increase this year, not 50%. Realistic KPIs keep your team motivated and moving forward. Small, steady wins add up.
Step Five – Review and Adapt KPIs Regularly
KPIs are not set in stone. As your business evolves, so should your KPIs. Review them regularly. Every quarter or every year, check if they are still relevant.
Has a goal changed? Adjust the KPI.
Has the market shifted? Update it. Adaptable KPIs keep you responsive to change. Your business is dynamic—your KPIs should be, too.
KPI Ideas for Family Businesses
Need ideas for KPIs? Here are a few to consider:
- Gross Profit Margin – Shows your profitability after direct cost of sales.
- Customer Retention Rate – Loyal customers are your backbone. Track them.
- Operating Cash Flow – Essential for understanding your cash movement.
- Employee Satisfaction – High satisfaction often means lower turnover.
- Sales Growth Rate – Tracks how fast your revenue is growing.
- Inventory Turnover – Ideal for businesses with physical goods. Shows how often stock is sold and replaced.
- Debt-to-Equity Ratio: A key financial health metric. Lower ratios indicate stability.
Each KPI tells a piece of the story. Together, they give you a roadmap for success. They show you what is working and what is not. They keep you accountable. And they keep you moving toward your goals.
In Conclusion
KPIs are a tool—a powerful one. They are not just numbers; they are a compass.
With the right KPIs, you have a way to measure success. You have a way to stay focused. And, most importantly, you have a way to ensure your business thrives for years to come. So, choose wisely, measure consistently, and watch your hard work pay off.
Thanks for reading…
by MHolland | Oct 25, 2024 | Accounting Software, Business Tips, Cloud-based Accounting
Running a business or organization is challenging enough without losing money you didn’t even know you were losing!
Profit leaks—small, unnoticed losses—can quietly drain your bottom line.
There is a solution – using your basic reports in a new way.
At ControllershipPLUS we take pride in highly accurate reports. Reports and numbers you can trust. There is nothing more irritating than going through your monthly reports and having that gnawing gut feeling that things are just “not quite right”. That never happens with our reports.
Starting with accurate, reliable reports, you can shine a light on profit leaks and plug them before they get out of control.
Let us dive into how financial reports can help you keep more of your hard-earned profits…
What Are Profit Leaks?
Profit leaks are those small, sneaky drains on your finances that might seem insignificant at first. Maybe it’s a supplier charging a little more each month, or uncollected invoices piling up.
Over time, these tiny leaks turn into major drains. If you don’t track them, they can seriously cut into your profits. The good news? Financial reports are like a magnifying glass for finding and stopping them in their tracks.
Especially ControllershipPLUS reports that are accurate, reliable, and timely.
The Reports You Need
Not all reports are created equal. Some are perfect for spotting leaks. Here are the key ones to keep an eye on:
- Income Statement (Profit & Loss): This is the big one. It shows all your revenue and expenses. If costs are going up but revenue isn’t, you’ve got a leak. Look for rising expenses that don’t add value, like bloated overhead. Overhead is especially problematic because most overhead costs are fixed and so do not go down when revenue drops.
- Cash Flow Statement: This report shows how money flows in and out of your business. If you are making sales but still struggling with cash flow, you have a problem. Cash leaks here could mean you are paying out more than you should or not collecting money fast enough.
- Budget vs. Actual: Think of this as your business’s reality check. You planned to spend a certain amount on marketing, but somehow it doubled? That’s a leak. This report shows exactly where your actual spending is veering off from the plan.
- Accounts Receivable Aging: If customers aren’t paying you on time, that’s cash you are missing out on. This report helps you track overdue invoices and reminds you which clients need a little nudge to settle up. We use a software for many of our clients to help stay current with our client’s receivables.
Where Leaks Happen
Now that you know what to look for, where do these leaks usually show up? Here are a few of the most common areas:
- Overhead Costs: Office supplies, utilities, rent—overhead costs creep up if you are not watching. Regularly reviewing your overhead expenses helps you find areas to cut back. Can you switch to energy-saving utilities or renegotiate your lease? Every little bit helps.
- Labor Costs: If you are paying out more in wages but not seeing a boost in productivity, that’s a red flag. Maybe some roles are overstaffed, or employees need better training. Tracking labor costs as a percentage of sales will show you where the imbalance is.
- Inventory Management: Holding too much inventory ties up cash that could be better used elsewhere. Not enough? You’re missing out on sales. Keep an eye on your inventory turnover rates to avoid stockpile buildup or missed revenue opportunities.
- Supplier Costs: Suppliers may slowly raise prices over time. If you don’t review these costs regularly, you might end up overpaying. Check your vendor agreements regularly and do not hesitate to negotiate for better deals.
- Operational Inefficiencies: Rising operational costs—like manufacturing, delivery, or logistics—are another common leak. Are there tasks that could be automated or outsourced? Use your cash flow statement to pinpoint where you’re spending too much on day-to-day operations.
How to Plug Profit Leaks
Once you have found the leaks, it is time to plug them. Here is how to take action:
- Set Benchmarks: Use your financial reports to set performance targets for each part of your business. For example, cap overhead at a certain percentage of total revenue. Compare regularly to see if you’re hitting those targets and course-correct if needed.
- Review Regularly: Profit leaks do not fix themselves. Commit to reviewing your key financial reports—income statements, cash flow, budget vs. actual—at least once a month. The earlier you catch a problem, the easier it is to fix. This is why one key deliverable with ControllershipPLUS is having a monthly meeting to go over everything from the past month and year-to-date so course corrections can be taken.
- Use the Right Tools: The best way to stay on top of everything is with the right tech. Cloud-based accounting platforms like Xero let you run reports anytime and from anywhere. They also automate a lot of the reporting process, giving you real-time data so no leak goes unnoticed.
- Involve Your Team: You cannot do it all alone. Share financial reports with your department heads and managers. When they see the data, they can take responsibility for their budgets and help keep costs down. Accountability goes a long way in preventing leaks.
It is Better to Outsource Your Finances Than Do It Yourself
Financial reports are powerful, but digging through them and figuring out what they mean can be time-consuming. That’s where a trusted accounting partner, like ControllershipPLUS comes in. We analyze your reports, spot profit leaks, and give you actionable insights—so you can focus on running your business, while we handle the numbers.
Conclusion – Protect Your Profits
Profit leaks are the hidden enemy of every business, but they do not have to be a fact of life. By using financial reports to keep a close watch on your expenses and revenues, you can spot leaks early and plug them before they grow. The result? A healthier bottom line, smoother operations, and more money in your pocket.
Thanks for reading…
by MHolland | Oct 16, 2024 | Accounting Software, Business Tips, Cloud-based Accounting
Growth is exciting, right?
However, if you scale unthinkingly, profit margins can shrink if you are not careful.
The trick? Boost efficiency, improve cash flow, and cut waste—without slowing growth.
Here is how to do it.
Number 1 – Streamline Operations
More growth does not have to mean more chaos. Tighten up operations for smooth, efficient scaling. Put systems in place for everything.
Start with operations, then marketing.
- Automate Repetitive Tasks
Free up your team by automating routine work. Software tools can handle payroll, invoicing, and inventory tracking—faster and more accurately than humans.
- Standardize Processes
Create clear, repeatable processes for key tasks. This ensures consistency and reduces time spent putting out fires. You can use software to help you create Standard Operating Procedures.
Number 2 – Improve Cash Flow
It is a cliché I know, yet cash is king. Managing it well ensures you are not just growing; you are growing profitably.
- Get Paid Faster
Tighten up your invoicing. Send invoices immediately, follow up on overdue payments, and offer discounts for early payments.
- Delay Payments (Where Possible)
Negotiate better terms with vendors. Pushing payments out by just a few days can give you a lot more flexibility.
- Track Your Cash Flow Regularly
Keep a close eye on cash in and out. Use real-time reporting tools to spot issues before they become problems.
Number 3 – Cut Waste Without Sacrificing Growth
Cutting costs does not mean cutting corners. It means using resources smarter.
- Review Your Expenses
Conduct regular expense audits. Are you paying for software no one uses? Could you negotiate better rates with suppliers?
- Reduce Energy Costs
Small tweaks like energy-efficient lighting or automated thermostats can save money over time.
- Optimize Your Workforce
Invest in training so employees can work smarter, not harder. The more efficient they are, the more profitable you become.
Consider offshoring Team members for non-core activities to lower wage rate countries like the Philippines.
Number 4 – Focus on High-Return Investments
Not all spending is bad. The key is to invest wisely.
- Invest in Technology
The right tech can speed up operations, reduce errors, and lower costs. Do not skimp on tools that boost efficiency.
For our clients, we are hyper efficient at using online software for all repetitive accounting and bill paying tasks.
- Focus on Your Best Customers
Double down on products or services that bring in the most profit.
Upsell to your top clients and nurture those relationships.
Scaling can be both exciting and challenging. But by streamlining operations, improving cash flow, and cutting waste, you will maximize profit margins while keeping your growth on track. Happy scaling!
Thanks for reading…
by MHolland | Oct 11, 2024 | Accounting Software, Business Tips, Cloud-based Accounting
As you know we manage all your internal accounting processes using online software…
Cloud-based platforms like Xero, Plooto, HubDoc, and ApprovalMax have made managing your finances easier, timelier, more accurate and efficient. But with the convenience of these tools comes the challenge of keeping your financial data safe.
In this post, I will walk you through the key security features of these platforms, share some common risks to watch out for, and offer tips on how you can protect your business from potential threats. Let us dive in!
Why Protecting Your Financial Data Is So Important
Your business’s financial data is a goldmine for cybercriminals. From financial transactions and payroll to sensitive tax records, your data holds everything hackers want. And the larger your business, the more attractive you are as a target.
Using online accounting tools like Xero, Plooto, HubDoc, and ApprovalMax is a smart way to streamline operations. Making sure they are secure is crucial.
Let us see how each of these platforms manages security and what you can do to keep your data safe.
Xero: Simple Accounting with Serious Security
Xero is known for being user-friendly, but it is also packed with features to keep your data secure. We are making sure that its security features are being utilized for you.
Xero’s Security Features:
- Multi-Factor Authentication (MFA): To log in, you do not just need a password—you also need a code sent to your phone, making it harder for anyone to hack your account.
- Encryption: Your data is protected with encryption both while it is being transmitted and when it is stored on Xero’s servers.
- Regular Backups: Xero backs up your data regularly, so you do not have to worry about losing everything if something goes wrong.
- User Permissions: For your benefit, we control who gets access to what, making sure only the right people see sensitive financial information.
We Keep Your Data Safe By:
- Enabling MFA: We make sure all users on your team are using multi-factor authentication to add an extra layer of protection.
- Monitor Activity: We keep an eye on user activity logs to spot any unusual behavior before it becomes a bigger problem.
Plooto: Secure and Streamlined Payments
Plooto takes the hassle out of payments, and it is designed with security in mind. Whether you are paying suppliers or approving invoices, Plooto ensures that your transactions are secure.
Plooto’s Security Features:
- Encryption: Every payment you process through Plooto is encrypted, so sensitive payment data stays safe.
- Approval Workflows: Plooto requires multiple layers of approval for payments, so no one person can send out money without the right checks in place.
- Audit Trails: Every transaction is recorded, giving you a clear view of what happened and who approved what.
How to Stay Safe:
- Tighten Approval Workflows: Make sure you review your approval processes regularly so that only the right people are authorizing payments.
- Review Access Controls: Regularly check who has access to approve transactions and limit it to those who absolutely need it.
HubDoc: Safe Document Storage with Less Paperwork
With HubDoc, you can say goodbye to piles of paperwork. This platform helps you organize and store financial documents, and the security measures in place ensure that your sensitive files are safe.
HubDoc’s Security Features:
- Bank-Level Encryption: HubDoc uses the same type of encryption as banks, keeping your documents secure when they are uploaded and stored.
- Automatic Data Extraction: HubDoc extracts data from invoices and receipts automatically, reducing the chance of manual errors that could lead to security issues.
- Multi-User Roles: You can control who has access to which documents, helping keep sensitive data away from unauthorized users.
How to Stay Safe:
- Set Clear Permissions: Assign clear roles for who can view and manage documents, ensuring that only authorized users have access.
- Remove Old Documents: Set up a process to regularly review and delete old, unnecessary documents to reduce security risks.
ApprovalMax: Keeping Approvals Secure and Efficient
ApprovalMax helps you control who approves what in your accounting processes, adding an extra layer of oversight. It is a great tool for keeping things running smoothly, but it is also packed with security features to protect your approval workflows.
ApprovalMax’s Security Features:
- Segregation of Duties: ApprovalMax ensures that no single person has the power to approve transactions alone, which helps prevent internal fraud.
- Role-Based Access: Just like the other platforms, ApprovalMax allows you to control who has access to which approvals, based on their role in your business.
- Audit Trails: All approval actions are tracked, giving you a full history of who approved what.
How to Stay Safe:
- Audit Your Workflows: Regularly check your approval workflows to make sure everything is set up correctly, and no unauthorized approvals are sneaking through.
- Limit Approval Rights: Only give approval rights to people who need them—and remove access when roles change.
Conclusion
When it comes to managing your business’s finances online, security should be a top priority. Platforms like Xero, Plooto, HubDoc, and ApprovalMax come with built-in security features.
We ensure, on your behalf, that they are properly configured and used. By setting up multi-factor authentication, managing access controls, and reviewing your workflows regularly, we help keep your financial data secure, so you can focus on growing your business.
Thanks for reading…
by MHolland | Oct 4, 2024 | Business Tips, Selling Tips
I wrote the following blog in 2018. I think it is great for a re-visit. For those who have not read it, please enjoy…
You Cannot Increase Sales
Yes, that is true, you cannot increase sales. Go ahead, try it. You cannot increase sales or profit (or lose weight for that matter), in and of themselves.
Why? Because those 3 things – (1) sales, (2) profit, and (3) weight loss are all results. They are things you can measure, but not manage.
What you can do is manage your activities. You can manage (and measure) the activities that make up those 3 things.
For example, you can make sales calls. That’s an activity you can both measure and manage.
You can reduce expenses by renegotiating terms with suppliers. That will likely have the effect of increasing profit, all other things being equal.
You can eat less, and exercise more, that will likely have the effect of you losing weight.
I am driving this point home because the only controllable things in life are activities. We cannot pre-determine what the results of those activities will be…we can only measure those results.
The reason I am pounding this point home, is because businesspeople and salespeople often say, “I am going to increase sales”. Great intention, of course, yet that is not a controllable activity.
It is particularly challenging with sales because sales are made up of 3 things, not 1 thing.
The 3 Things That Make Up Sales
What are sales made up of? Customers buying goods and services? Yes, of course. So, let’s look a bit deeper. What are the 3 things (and only 3) that make up sales.
It plays out as a formula, and it goes like this:
- Number of active customers
X
- Number of times they buy from you (in accounting terms that would be transaction frequency)
X
- The average amount they spend with you per visit (person or online)
=
TOTAL SALES REVENUE
So, why is this important?
The One Thing People Focus On
It is important because when people say, “I am going to increase sales”, they almost always mean they are focussed on getting new customers.
Of course, getting new customers is a perfectly legitimate way of growing your business, and we need to all focus on that as businesspeople.
However, as you can see in the above formula it is only one way to grow your business. There are two more (3 more, but this blog is just focussed on the 3 ways to increase sales).
And we all know that getting new customers is the single most expensive way to grow your business.
The Second Part That Even Huge Businesses Miss
The 2nd way to grow your sales is to focus in on increasing the number of times your customers/clients do business with you.
Now, you will begin to see that as a strategy it is completely different than way #1 – increasing the number of customers in your business.
And as a different strategy, it will lead to different activities, which – as your goal and intention – lead to different results – increasing sales.
So, what could you do in your business to encourage people to come back more often?
Here are a couple of ideas:
- A quarterly newsletter talking about new products and/or services
- A loyalty card
- Phone calls, reaching out to connect with existing clients
This is where brainstorming with your Team can really create a massive list of fun, creative ideas. Then, take your list and prioritize and take on the top 3 to implement.
And remember this – what gets measured gets done.
Let me give you a real-life example of the 3rd idea above – making more calls to your clients.
A client of a colleague of mine (a business coach) complained that his business was growing at a snail’s pace. My friend coached him to do this one thing – block every Friday morning off to call his clients.
And do what, you may be thinking? Well, it wasn’t just to connect and talk about the weather.
What this professional service provider did, was simply ask rocket-science level questions, like, “how are things going in your business?”, and “what are the issues you are dealing with now this quarter?”
Those simple questions led to them talking about their problems to this person.
This professional service provider acted wisely He did not jump in immediately with solutions. He kept drilling down with impact-type questions, as in, “what is the impact on your business of that problem you just shared with me?”
This often led to his clients asking for him to take on some of these issues. This led to more work for the professional service provider.
What were the results? They shocked him. Sales doubled, and soon he moved into a bigger home to retire to.
And his clients were happy, as the professional services firm became more involved and solving chronic problems for his clients.
That simple activity of blocking time to call his clients and ask simple questions led to more work for the company.
And here is the kicker – do you think those clients felt more cared for, or less? Do you think that increased or decreased loyalty?
And this was an activity the business did rather than focusing on getting new clients.
Lastly, what do you think the cost of those new sales were? Higher or lower than going after new clients? Only the cost of his time to make a call.
The 3rd Part That McDonald’s Has Mastered
The 3rd way to increase sales is to increase the average sales value of each transaction.
I think we can all see that this, again, like way #2 is a completely different strategy than way #1.
What are some ways you can increase your average sale?
- Bundling – putting together a package of goods and services hat solves a total problem for the client/customer
- Scripting – just asking for the sale! (I will talk more about that below…)
- Asking questions
- Newsletters
- Price increase
Again, as in number 2 above, you will want to brainstorm ideas here with your Team and come up with 3 to put into practice right away. Measure your results.
Let us take a closer look at 2 of the above ideas. One is scripting, the famous McDonald’s “would you like fries with your burger?” is an obvious example. McDonald’s measure everything and that script has measurably increased sales and profits dramatically.
Another way to increase sales is to affect a price increase. I can hear many of you reading this saying, no way, I cannot do that without losing customers!
I hear that all the time, when I suggest businesses increase their prices. It goes something like this: “I cannot do that, Mark, because I am in a competitive industry and if I do that I will lose too many customers and scare off new ones too!”
Just last week, I met with a client whose production manager convinced the owner (who was an initial “no” to a price increase) to increase prices by 5%.
They did. Do you want to know how many customers they lost?
Zero. That’s right, zero. They have loyal customers who love their product (organic food supplements), and a 5% price increase was too small to have them leave.
The result was a direct increase to sales that fell right to the bottom line as an equivalent increase to profits!
It costs you nothing to implement a price increase…
Creating a Profit Improvement Plan
Ok, so now it is time to put it all together.
If you concentrate your energies on all 3 areas of your sales – increasing new customers, increasing the number of times they do business with you, and increasing the amount they spend per visit, you will have an amazing compound effect on your sales.
Try it out. Print out and fill in the blanks of this Profit Improvement Chart and see the impact of a 5% change in these 3 ways to grow your sales has on your bottom line.
| ESTIMATE YOUR PROFIT IMPROVEMENT POTENTIAL |
|
|
|
| Company Name: |
|
| Year Ending: |
|
| Date Created: |
|
| Components of Profit |
Present Position |
Change Factor |
Possible Position |
| Number of Active Customers |
|
5% |
|
| *multiply this by the average purchase frequency |
|
5% |
|
| Number of Sales Transactions |
|
|
|
| *multiply this by the average value of a sale |
$ |
5% |
$ |
| Total Sales Revenue |
$ |
|
$ |
| *multiply this by the gross margin |
% |
|
% |
| Total Gross Margin |
$ |
|
$ |
| *subtract the fixed overhead from this |
$ |
|
$ |
| Net Profit |
A $ |
|
B S |
| Profit Improvement Potential |
B-A |
|
$ |
You will be amazed…. thanks for reading!
