Measuring small business performance
Performance measurement
In this article you will learn about:
Why it’s important to have reporting mechanisms in place
What is a management report
Management reports versus financial reports
What management reports include
Reporting mechanisms for your business are important. Here’s why:
To succeed, small business owners need to make smart decisions based on data. According to a study conducted by Harvard Business School and MIT Sloan School, data-driven businesses had a better financial performance, were more likely to survive and were more innovative. To be a data driven business, having the right reporting mechanisms in place is essential.
Mechanisms in the form of business intelligence tools help small businesses to make these data-driven decisions. If you have ever asked yourself how you can increase sales and make your small business more profitable; who your best customers are and how can you keep them loyal; how do you make your business more efficient and reduce your operating costs; or how you can find and keep the best employees, then business intelligence tools are a good idea for your business.
Business intelligence reporting tools are software applications that help you to collect, clean and interpret your data. They help to:
Monitor Key Performance Areas (KPAs)
Creative informative reports
Share insights
Drill down into data for deeper analysis
Automate repetitive tasks
When you put the right reporting tools in place you will be able to become more efficient, grow your revenue and increase your profitability. Reports allow you to track your progress, identify areas of improvement and make more informed decisions.
What is a management report
Management reports are analytical tools that show the financial and operational performance of the business. Business leaders use them to help them make strategic decisions and monitor business growth.
Management reports versus financial reports
Businesses are legally required to keep financial records and reports for accounting purposes. Because they are a past view of a business’ performance, financial reports are not ideal for future decision-making.
Management reports use a lot of the same data and information as financial reports but they are presented in a more useful way. A management report helps business leaders to answer questions like:
Are projects or jobs being correctly priced?
Who are my most profitable clients?
Do I have enough cash to make payroll?
Are my lead times too long due to a lack of staff?
Will business profitability be affected if I increase headcount?
How should I spend my marketing budget?
What should management reports include
A good management report should include the following:
Strategic goals and objectives
The right key performance indicators (KPIs)
Customer feedback
Storytelling to contextualise the facts and help to engage the reader
A visually appealing report
Information should be presented clearly and in an easy-to-understand way
Be concise
Real-time insights that align with your objectives
What can you do now?
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A final thought
Management reporting is a control tool used by small businesses to ensure they are they are meeting their objectives and are profitable.
Key Takeouts
The ideal reporting system collects, stores, analyses and provides access to important information and data regarding the business and is used to make better decisions for the business.
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