You’ve put in the time necessary towards preparing an effective business and/or budget plan for your company, now go the extra step in fully utilizing all of your hard work by collecting data and measuring your company’s overall performance. During the analysis, make sure to take into account sales, costs and working capital. Any financial trends, whether it be cash-flow or profitability measurements, will show up in these figures and provide you with the means necessary to spot problems early on.
In particular, always make sure to check the following two key items:
Income: Analyze reasons for shortfall (lower sales volume, flat sales, market, etc.), consider reasons for high turnovers (how low were your original targets?) and compare the timing of your income with your projections (do they match up?) All noted variations should assist you in figuring what – if any – immediate action is necessary to fix a problem, while also helping to set you up with a more accurate future budget.
Expenditure: Take a look at how fixed costs may have differed from the budget, check that the variable costs are in line with what you budgeted, analyze any reasons for changes in cost-turnover relationship and make sure to look at the differences in the timing of your expenditures, too (reviewing this key item allows you to predict future costs with greater reliability).
Measuring performances can also be very useful. They act as an indicator of costs and revenues to all of your business’s activities and provide informational support for any management decisions that need to be made.
All final figures gathered should be set as benchmarks for your business. Compare these numbers to budgets from years’ past and measure for any signs of growth. Hopefully, the results are positive for your company.
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