In previous blog posts I’ve written about why an Executive Support System (ESS) is important in helping CEOs to make forward-thinking decisions. I’ve also explored some of the detailed metrics and ratios that an ESS tracks, like the three types of profitability metrics.
Now I’d like to give a quick overview of the four core financial disciplines that every CEO should be monitoring in their companies. Read the rest of this entry »
“What’s the bottom line?” This phrase is so overused in business and popular culture that I’d venture to call it a cliche.
If you’ve ever watched an executive look at an income statement, you would realize why “the bottom line” has become a part of our everyday parlance. Most CEOs glance briefly at an income statement before skipping right down to the bottom line at the end of the statement: net profitability.
While net profitability is important in representing the overall health of a business, it is one of the least actionable metrics, meaning there is very little you can do to directly change net profitability by itself. Read the rest of this entry »
An Executive Support System (ESS) is a software solution that can help CEOs to make more pro-active and informed business decisions. The system works by aggregating and comparing data from across a company’s accounting, sales and other processes.
Looking at key metrics in each area of a business, the ESS will calculate helpful ratios like AP/AR ratios, Z-score and Days Inventory, which can all indicate the overall health of a business and help CEOs to make important, forward-thinking decisions.
At Brightmetrics, we recognize that most CEOs do not have a formal financial background, so our ESS also explains how each ratio is calculated, what the ratio means and what the executive can do to bring his ratio back to a healthy level. It would take a talented CFO’s skill set and time to crunch the numbers and come up with the same insights that an ESS generates automatically. Read the rest of this entry »
When I started an IT services company, I was an IT expert but not necessarily an accounting expert. I was so busy working with my partners to get the company up and running that I didn’t have the time or interest to dig down and get deep into the financials.
Just starting out as the CEO, I remember managing the company’s financial standing by looking at basic monthly accounting reports like balance sheets, income statements and profit and loss statements. Financial metrics seemed pretty black and white to me at the time, and as long as the monthly reports looked good and there was money coming in, I thought we were in good shape.
It didn’t take me too long to realize that I wasn’t getting the whole picture. I soon recognized that those monthly reports were really just snapshots in time and did not reveal any important trends or insight into the future health of the business. Read the rest of this entry »