The Power of the Monthly Business Review

Are you struggling with a true understanding of where your business is each month?  Wondering about cash flow and trying to estimate costs and expenses?  Do these issues hinder your decision-making ability?  Do you get hit with large expenses or revenues that make you feel a little bit like riding a roller coaster in your business?  Is it difficult to make quarterly and yearly estimates for future planning?  Is your accounting done on a cash basis?

If you answered yes to some of these questions then I have been in your shoes, as most entrepreneurs & CEOs of small to mid-sized businesses have been in as well if they "went it alone".  Thanks to a great coach and mentor, I learned about the Power of the Monthly Business Review.

It's actually quite simple once you get through the initial efforts, but the rewards were amazing.  I’ll talk high-level about what's in the review and spend more time talking about how and why it was so beneficial.  Let me give you an idea of what it is:

You get your accounting switched from cash to accrual (stay tuned for a separate post on why this is so beneficial) so you get a better picture of your financial health month to month as opposed to managing and reporting based on timing money leaving and entering your account.

You break down your revenue, costs of delivery / goods, sales, marketing, commissions, administrative, benefits, accrue bonus payments, below the line costs (if you don't know what this is, you will when you sell your company), and calculate your gross and net margin on a monthly basis. 

You also capture other elements that are pertinent to your business such as working capital, backlog, product inventories, service deliveries, etc.  You report the most recent month, plus the previous months (and years) for growth comparisons.

Here's what happens when you start to do this

You and your business begin to transform.  When you start looking at these numbers, you understand what's driving their growth or decline month over month.  You get your leadership to review these numbers with you and you refine what you look at each month based on what is actually making your business grow or stall.  You start to care more about costs, both forecasting and managing them.  You also gain confidence because you see patterns in the numbers that you recognize based on your experience, but have never quite visualized this way before.  You feel enabled to hold your team accountable for numbers based on your plan. You become able to build a plan because you have a well understood history.  The list of benefits goes on.  Remember, "Something measured is something watched.  Something watched is improved". 

Although it is difficult to point to one single component that improved my business, the monthly business review may be the one.  It certainly is the one I would implement almost immediately / first in any business to measure, monitor, and focus on how to drive those metrics in the right direction.

Finally, I want to state the obvious:  Numbers don't lie.  I see a lot of folks that "talk" about their numbers, I used to be one of them.  However, when you put these numbers into a spreadsheet and show them to your leadership team, there is no hiding behind vague phrases like "It's getting better".  Show me.   Accountability takes a huge leap forward when the scoreboard is right there every month.  You begin to put your energy into improving those numbers. When planning project or quarterly objectives you ask your team how meeting those objectives will drive these numbers.

Please don't think this makes running your business impersonal or sterile or "just about numbers".  It actually has the opposite effect.  People want to do well, they want to see where the issues are so they can be discussed.  They also LOVE to see improvement.  This gives them the opportunity to get on the same page and work together to improve the business.  It brought my team together and gave us focus, purpose and trust in aligning our success.