Years ago, I flew with a private pilot who each time we would land would clearly and emotionally state, "Once again we have cheated death." I never felt very good about that statement or attitude it revealed. In fact, I soon quit flying with him because I began to worry about being close to crashing and burning every time he was at the controls.
Many of us as small-business owners and entrepreneurs do not know whether we have "once again cheated death" until we get our profit-and-loss statements six weeks after the beginning of each month. Unfortunately, it may then be too late.I suggest there is a better way: it's called a flash report. My early warning system consists of a regular periodical summary of eight to 10 key indicators that are unique to the business. Like the dials in an airplane cockpit, the flash report can keep us informed about vital information such as cash flow, sales revenues and collections.
Used in conjunction with a flight plan, or more conventionally called a list of company objectives, a flash report can clue us in on how close we are to "death" when we are far enough away from it to do something to avoid it.
The reports can be done hourly, daily or weekly. I prefer weekly.
I like to track a combination of financial and operational data because each is interdependent and vital for a smooth and successful business venture.
Unlike revenues on an income statement, which is often kept on an accrual basis, the flash report can be used to report the cash that actually came in the door.
I also carefully monitor the difference between out-go and cash, especially during the critical start-up phase of a new business. I like to know the checkbook balance on a regular basis. So, that is included on my flash reports as well. Some reports include cash in the bank, but for me, the checkbook balance is much more relevant.
Since sales are so vital to many operations I am involved with, I want to see the number of invoices issued and average sale booked. Another measurement that some might want to track is the days between the sale being closed and the invoice being mailed.
Manufacturers might want to use flash reports to measure setup times on machines and how that relates to batch sizes.
If I operated a retail operation or a restaurant, I would design my flash report to monitor the average sales ticket.
Without tracking these types of financial and operational issues on a regular basis, I would feel that I was flying blind. But, with a well well-designed, carefully tested, and frequently reviewed flash report, one can fine-tune his business in the areas that it needs it most.
Then, you can not only "once again cheat death," but you can also prolong your flight, take out the bumps, and land your plane with a cargo full of dollars.