Value Smart

How Measurement in Management Reports Leads to Successful Business Turnaround

Gaining financial control in your business is not as hard as you might imagine - Business Turnaround

By Willie van Dyk on OKT 14, 2021

How Measurement in Management Reports Leads to Successful Business Turnaround

Times are tough. Your company is struggling. You need a business turnaround, but where do you start? Here’s where to find the answers for financial recovery.

You Can Turn Around Your Struggling Business

The phrase business turnaround—even though it means financial recovery—carries a bad reputation. It is mainly associated with restructuring, which many read as “retrenchments”, but it doesn’t have to be that way. Minimising staff is not (necessarily) going to stop the bleed if the cut is elsewhere in your business. You need to address the root of the problem or risk finding yourself in the same position, wondering why your last band-aid didn’t work. Fortunately, the answers to your problems lie in plain sight.

How to Find the Right Insights for Better Business Decisions

If you have been following our Finance 101 blog series , you’ll remember that we spoke about gaining greater financial control with financial controls in our previous post. To recap, financial controls enable you to enforce the strategy set out in your budget and better monitor financial resources.

Why is that important?

How to Find the Right Insights for Better Business Decisions

Your management accounting reports paint a picture of how your business is performing by comparing your current figures against the last period. Typically, you’d do a year-on-year review of your monthly figures.

So, if you’re trading up from last year but falling short on cash flow, you can quickly spot what else has changed to identify the cause. Perhaps your rent increased disproportionality to what you’d forecasted . Oh wait, your software and licensing costs are higher than usual this month. Oh, somehow, a new purchase was made instead of an upgrade on your POS software. Eek, you’re getting double-billed.
These are simplified examples, but they illustrate how measurement and comparison assist with analysis and identification.
What to Review (And How to Do It)

Your management reports will summate all your management accounts in the form of: Business Turnaround

  • Balance Sheets

  • Cash Flow Statements 

  • Income Statements 

  • Status of Accounts Payable and Status of Accounts Receivable (or Aging Reports)

  • Budget Reports 

  • Cost Managerial Accounting Reports (or Item cost reports)

  • Performance Reports 

Giving you a holistic view of your company’s: 

  • Actual Turnover 

  • Gross Margin

  • Overheads 

  • Operating Profit 

  • Growth Percentage

  • Cash on Hand (money in the bank) 

  • Assets and Capital Expenditure

  • Liquidity and Solvency Ratios

It is important to review how the figures are tracking against your:

  • Previous periods, 

  • Budget, and 

  • Forecasts.

ValueSmart works on the principle of “left to right; up and down.” This is an effective way to ensure a thorough review of each of the line items.

Look for major and minor discrepancies and question everything. If the reason for a variance is not apparent, dig until you find it. 

Once you know what’s causing a problem, you can devise strategies to correct them. Some things will be quick fixes, and others may take some time. The good news is that you’ve stopped the culprits in their tracks, never to be repeated.

Your last step will be to adjust your budget and targets according to your new insight. Double-check that your systems and controls support the new strategy. Then reconcile your accounts and review your reports regularly.

Book a one-on-one zoom consult with Willie van Dyk!