Keep Your Pulse On Developing Tools
Technology and alternate ways of doing things are always in a state of flux. Whether it's outsourcing some of your operations or looking at techniques that aid your decision process, it's important to keep emerging tools and practices on your radar screen.
One example is the evolving nature of financial planning and analysis software that transcends beyond traditional spreadsheet tools. Do you ever wish you had a crystal ball to aid your business decision process? Would you use such a tool if it was available? With operations becoming more and more complex, having the ability to anticipate, analyze and assess alternate strategies before committing valuable time and resources is becoming vital.
For instance, does your current financial forecasting model provide answers to the following types of inquiries?
What will happen to profitability, cash flow and our line of credit if the new product launch takes nine months rather than three? (How will we deal with such a delay?)
What are the principle activities that drive our business model, how do they impact our operations and how well do we know the inter-relationships involved? (Can activity based costing, planning and management put us back in control?)
What is our contribution margin percentage, how does it affect our break-even point and would we be better off with more automation that reduces our variable costs? (Do we really understand our product and service cost relationships, how they behave and how sensitive they are?)
If we acquire the market leader in our southern territory, what synergies can we anticipate from the deal and how would that impact the EBITDA valuation of the combined entity? (Does the deal make sense given the current asking price?)
If new technology and specific training can increase the productivity of our sales team by 35% what will that do for our staffing levels, our travel budget, and most importantly our bottom line? (Can we evaluate this alternate scenario with a few simple clicks?)
If we drop the sales price of our flagship product by 20% how many additional units will we have to sell to increase our profits by $500,000? (Can we dramatically expand our market share by passing on manufacturing efficiencies to our customers?)
What are our key performance measures and can we view them as an interactive dashboard and test the validity of our assumptions? (Can we do the "smell tests" so important to effective financial planning?)
These are just a few examples of decision alternatives that confront today's managers. The old analysis tools were good but the newer tools enable more strategic decision making. Financial tools that were only available to very large organizations are now becoming economically affordable to mid-size and smaller operations.
Your job is to pay attention to the emerging tools that leverage your ability to understand, manage and control your operation. Listen to your peers, read general and trade magazines, have a technology mentor and keep your pulse on what is developing. Your future will be the better for it.