By Rich Bond
Do you feel that your finance person gives you numbers that have no meaning or actionability?
I get annoyed with financial people who go into great detail but have little to say in terms of what needs to be done to improve performance.
For example, a key indicator of success in most businesses is gross margin, which is only meaningful if analyzed over time.
If a company’s plan is based on a 40% gross margin, then actual gross margins of 39%, 38%, and 37% in the first three months of the year should set off an alarm.
The profit shortfall, assuming margins don’t erode any further, is almost $300,000 for a company with sales of $10 million!
Gross margins can be improved in multiple ways, including price increases, cost reductions, or by selling more high-margin products. Each course of action needs to be analyzed.
If no action is taken, the company will need to make cost reductions to offset the margin shortfall to achieve its profit objective.
If your finance person is not talking to you in straight forward terms, you may want to talk to me about finding a replacement.
Better financial input will help your company achieve better financial results.
We use a 5-step process to help our clients hire and retain financial professionals who have added $100,000 to $100 million to their company’s bottom line.