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Why the Letters A&E can save your business

August 14, 2011

Most people when they think about A&E think Accident & Emergency.

However I am talking about Actual and Expected – or how is your business actually performing against what you expected. I have spoken to a number of business coaches and accountants who state that businesses that  grow and thrive regularly review their business progress on either a quarterly or monthly basis.

The converse also applies – those that struggle and go under spend very little (if any time) analysing this information.

You may niavely suggest that your accountant produces your accounts every year and this is sufficient. I would almost bluntly say that it is not – for a number of reasons:-

  • Your accountant will produce information which is typically a year out of date – to keep ahead of your business you need info which is created monthly or quarterly.
  • Your company returns will lack the detail that you require to analyse your business effectively. For example the accounts will show only the annual turnover that has been made – not your monthly turnover

So where to start ? A simple way would be to make a list of questions that you would like to answer about your business and then gather the information that can help you answer these questions:–

  • What is my monthly turnover ?
  • Who are my biggest customers ?
  • How much do I spend on overheads every month ?
  • How long do my customers take to pay me ?

You can set this information up in an excel spreadsheet and develop it over time. You might consider having a seperate tab for each months activity and then a summary sheet that gives you a high level view. To make it easier, you could even put this information on a graph. A simple graph showing your actual sales versus your expected sales can be a real eye-opener.

As you become more proficient, you can develop the spreadsheet and even consider automating it. I remember one of my first clients who used to take 8 hours a month trying to reconcile the actual business activity with the expected. I managed to redesign the spreadsheets so that it produced all the information automatically.

My client said that as well as saving him 8 hours a month, it also saved his business and probably his marriage . He could see exactly how his busness was performing and was able to take rectifying action within a matter of weeks.




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