BUSINESS INDICATORS AND WARNING SIGNS

Do you employ a method to determine the pulse of your business? How many times have you asked or heard someone say; “How did we get in this situation”? When you go to the doctor, he usually will ask a lot of symptomatic questions to help him sort out the possibilities, to determine what brought you into his office. Why then couldn’t we use the same approach to managing the future of our businesses? You can easily practice the same fundamental logic.

For many managers the use of the monthly financial statement and the sales backlog are their only yardstick or indicators of how they are doing. This alone won’t provide a lot of answers as to where you are CURRENTLY or where you are headed, because this is only the financial picture. Important? Yes, but this is only part of the entire business picture. Waiting for month end reports can sometimes take too long and even then may not provide much insight. Many companies today also use operating ratio’s to better determine their finances and cash situations. This information helps but is also usually five to six weeks old or even longer for many companies. But the idea of using a number to measure financial change, keeps it simple and easily understood.

There are indicators or numbers that you can develop from the list below that will provide a more timely pulse on your business. It shouldn’t be difficult or require any significant amount of time to generate the data because it probably already exists somewhere or is simply in another format.

Indicators and Warning Signs

– Changes being made without a plan

– Increased customer product complaints

– Deterioration in facilities

– Higher product failure/rejection rate

– Projects falling behind

– Employee morale changes

– Repeat business declines

– Uncontrolled expansion or growth

– Customers leaving

– Competitors taking business

– Costs are increasing

– Stress increases

– Technology change in the industry not noticed

– Good employees are quitting

– Aged accounts receivable increasing

– Decline in advertising and promotion

– Increased lead-times

– Revenue is falling

– Market share loss

– Non product customer complaints

– Output ratio per person (sales/units-production and total)

Most key managers should be able to provide short term insights into all or most of these items that fall within their areas of responsibility. Some of these can be measured on a daily basis and others less infrequently, but they can tell a story over time that will help you to take remedial steps and keep your business running more smoothly.

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