Flying blind causes crashes. Entrepreneurs often have a weakness for winging it, for managing by the seat of their pants, for flying blind instead of paying regular, disciplined attention to what the performance numbers are signaling about the state of their business’s health. They don’t look for honest feedback that will give them a clear picture of what’s beginning to go right and what’s beginning to go wrong.
Imagine if your car didn’t have dashboard instruments. You would have to guess when you need to add fuel. You could estimate your speed and hope the police agree with your estimate when you get pulled over. You wouldn’t have a warning that your engine needs servicing until it needs costly repairs.
A business owner who isn’t getting performance numbers from their business is in pretty much the same situation. They are just guessing. They are not able to react to problems while they are small and easy to correct. They often miss opportunities to increase sales and profits because they don’t know what their most profitable customers and products are.
Some business owners are simply undisciplined or lazy, and can’t be bothered with the details. In that case, they deserve to suffer the consequences. However, it’s usually not willful negligence. It’s not because they don’t want to check the vital signs. It’s because they simply don’t know what information they should have or how often they should be getting it. The information is not easy to get or understand, and is never ready when they need it.
What reports should you have? I would recommend:
- A morning report that recaps your daily cash balance, sales, receivables, and payables balances.
- A weekly list of customer orders not yet invoiced or delivered.
- A weekly report of customers who have past due receivables. A weekly report of what bills are due next week.
- Monthly financials. Have your CPA ensure that your internal financials are accurate. You don’t want to be making critical decisions using bad data.
- Monthly sales by product.
- Monthly sales by customer.
My most profitable clients understand the importance of not flying blind. I don’t think that it is an accident that they know their numbers and that they are highly profitable. Creating a dashboard or improving the one you have should be one of your top priorities for this year.