Many managers experience the monthly figures as an obligatory issue. And that’s exactly what it is. Monthly figures are distracting, often incomprehensible and sent in too late or not sent in at all. It’s difficult to find one’s own contribution to the results so a message from the management stating “we must do better” is not effective. There is no ownership.

From my 20 years of experience, I know that there is a way to effectively deal with the numbers, without really changing the current systems. It only requires courage and a change in mindset.

Income statement

Below is a simplified income statement of the monthly figures. You can make it as extensive as you want, but generally, this is sufficient. I have a similar setup for the cash flow. The principle is as follows, each row in the income statement has someone who is responsible.

The sales manager brings the money from outside by clear transactions, such as signed quotes, actually paying customers, repeat sales, etc. Purchasing is sometimes also in the hands of sales. Smart purchasing together with the selling price determine the gross margin.

So address the sales manager on revenues and the purchasing manager on unnecessary purchases, because these are hard to sell with good margins. If this is the same person, that’s even easier.

Indirect costs

There is also a large amount of indirect costs that no one feels responsible for, at least, until now. Every row can be assigned to a manager (with a short and long term vision). For example, paying the least and demanding the most from employees may be good for the company’s bottom line in the short term. But in the long run, people will leave, will be sick more often, with high attrition, a bad  atmosphere and in the end nobody will want to work for the company anymore. That’s obviously not what you want. A healthy mix is therefore in the hands of HR, who must convince the other managers.

Investing for the long or short term

Another example: production is responsible for depreciation and maintenance. This way, you effectively maintain the balance between investing in new machines in time (high depreciation, but low maintenance or repair costs) and continuing to use the current machinery for a longer period (similar, but vice versa).

The same applies to marketing and sales costs: do you invest in the long term (more marketing costs) in order to sell more easily later (lower sales costs) or do you save temporarily and see the opposite effect in the near future?

Finally, the finance manager. You can talk to this person about the remaining topics, because he/she, obviously, will put the brakes on everything. But he/she also has to deal with the short and long term commitments: saving on IT results in inefficiencies, interest is a consequence of smart financing, paying taxes can be partly planned, etc.

Figures per quarter

My personal vision is to deal with the financial figures on a quarterly basis. However, you should produce certain KPIs or ratio charts on a weekly or monthly basis. They can be used to respond immediately, such as quotes issued versus scored orders, number of employees versus the turnover and number of customers versus the turnover and gross margin, etc.

I have elaborated the above principles into a complete scheme with many more angles, based on my many years of experience as a financial manager. This diagram is also suitable for the cash flow and the balance sheet.

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