Our strapline sounds good and seems reasonable but what is a realistic expectation and how do we prove it - that's our challenge.
Years ago I was the Financial Controller for parts of very large companies - Unilever, Marsh & McLennan, TV Times, Time Life and Times Warner. Naturally I reported monthly otherwise I would have been shown the door pretty quickly.
I left this world to start BookCheck which from the first has provided monthly Management Accounts but the strange thing is that such monthly MI is almost unheard of in our prospects with turnovers from £250,000 up to £1 million and unlikely, especially in quality, above that. So why is this? There are two key reasons:
- lack of skilled resources to produce them
- lack of knowledge or experience to use them and benefit
Although our prospects have a natural bias in that they are talking to us, very few have Management Accounts (or MI) or if they do then it's so unsound it's worse than useless. So would these businesses be under achieving profits by not measuring?
It ought to be possible to produce quality MI, use it and then expect a significant increase in profitability but by how much?
How do we calculate a range of expectations? The ideal would be to measure our clients but that will take time. So we wonder are there are any UK statistics on this subject that we could use?
At least we have one client example - they started with us engaged on 25 contracts with a typical life of 2 to 3 years. The business was impressive however they had a big weakness - they didn't know the individual contract profitability. Now they do from our BAR - BookCheck Advanced Reporting, now they work on the lower profit areas to improve, they also focus on the higher profit areas to increase such business. It's all so obvious but it hadn't been achieved previously. Over time it's increased their Gross Margin by 3% which on a turnover of £3M has added £90,000 to their bottom line. That's one heck of an achievement from just reporting.
Measuring overheads likewise is the basis for a significant reduction in costs but by how much on average? Would 10% be reasonable?
Our challenge is expanding this information across our client base in the meantime does anyone have any research on what a reasonable expectation might be? Of course the interesting extension is what would be the effect of properly used MI on the results of UK plc?
Author - Anthony Pilkington, Managing Director of BookCheck Ltd image from aussiegall