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| Thursday, 09 September 2010 01:05 |
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Taylored Comments The Roadmap to Profitability Financial Dashboard by Jeff Razafsky, Senior Consultant In 1981, I was a Corporate Planning Specialist for United Computing Systems, Inc., a mainframe time-sharing company owned by United Telecom (now known as Sprint Nextel). We had recently sold Calma, our computer-aided design company, to General Electric and had purchased Megatek Corporation, a manufacturer of high-end graphics terminals. Megatek products were used primarily by engineers to visualize the objects they were designing. Our president wanted to expand Megatek into the business applications market and asked me to develop a prototype application for a business executive’s workstation. The following weekend I happened to be at a railroad museum with some friends. As we toured the cabin of an old steam locomotive we were fascinated by the numerous gauges, tubes and valves. It occurred to me that the paradigm of a steam locomotive might be a good way to graphically present a business’ performance. The gauges would show critical financial statistics, the tubes would show the relationships among the gauges and the valves would provide “what if” capability. The following Friday evening our president dropped by my office and much to my surprise asked if I would be interested in working on a multi-month project with our UK-based group. I didn’t have to think twice; on Monday I was working in London. The business executive’s workstation prototype was put on hold and as it turned out - permanently. Twenty-five years later, as a Consultant with the Taylor Business Group, I was using Excel spreadsheets to analyze and review financial performance with my clients. Spreadsheets worked well with many clients. For those having little training or background in business, however, these reviews could become tests of their endurance. It was apparent that a faster, more intuitive means of imparting business performance information was needed. With the powerful hardware and sophisticated software tools available today it was easier and less expensive to turn 1981’s business executive’s workstation concept into modern reality. In last week’s blog about benchmarks, Larry Schulze asked “If you do not know what and how to measure your performance, both financial as well as your activity levels, how do you know what areas to work on your business to make it better?” He went on to discuss the need for collecting financial and operating data in appropriate detail. Of course once you have your numbers you need targets, i.e. benchmarks, for comparison. For revenues and profits benchmarks represent minimum acceptable performance. For expenses benchmarks represent the “do not exceed” number. Early in the life of the Taylor Business Group Larry developed a comprehensive set of benchmarks based upon his experience with many clients and surveys that we conduct. The benchmarks are updated every year. Our Roadmap to Profitability Dashboard or “RTP” as we refer to it makes extensive use of our benchmarks. The key benefit of RTP is its ability to process the mass of financial detail and quickly call your attention to areas of the business requiring attention, that is, the areas that are not meeting or exceeding their benchmarks. This is accomplished visually with gauges. A critical financial ratio or percentage whose gauge has its needle in the red alert area highlights an area of the business needing management attention. For example, if the gauge needle for product gross margin is in the red alert area then product margin is below our 15% benchmark. The financial impact on the company of this substandard margin is readily apparent as you scan across the dashboard. To investigate the impact of increasing product revenues or reducing product costs, you can drill down into RTP’s “Products” screen and perform “what if?” analyses using the sliders. Again the financial impact on the company is readily apparent in the rest of the dashboard. This type of analysis also applies to the Service, Sales and Admin Departments. Finally, RTP analyzes your balance sheet as well as revenue, expense and profit trends. I was recently at a lunch with the former President of United Computing Systems. I could not resist telling him that I had finally finished the project that we started nearly 30 years ago. He was quite interested…enough so that wants to try the RTP demo on our website. I look forward to hearing about his experience with it. I would be equally pleased to hear about your experiences with RTP and your ideas for enhancing it. You can try the Roadmap to Profitability demo at www.taylorbusinessgroup.com/roadmapdemo.html Comments (0)
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