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 »
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 »
It’s great to know where you are today in terms of your business’ health, and a good Executive Support System (ESS) can give you the full picture you need in order to make sure there are no hidden surprises lurking underneath the monthly reports. But in the next six to twelve months, do you know whether your industry is going to enter a period of growth or a downturn? Do you know if you should be investing for future growth or hoarding cash to ride out a downturn? There is data out there that can help you to make the right decision but it’s extremely difficult and costly for SMEs to obtain and correctly analyze this information. Read the rest of this entry »
In my previous life, I ran a $3 million IT services company. Determining where we were in each sales cycle, when our operations center would be backlogged before it happened, and where our cash flow would be 30, 60, and 90 days out were the kinds of things we were always striving for. For most of the time that we ran the company, these were gut checks. We could hope that we were making a good guess but we rarely had a lot to back it up.
How does a management team go about figuring this out? Knowing your past and current state, in most cases, is just not enough. It’s a start to look at a graph of these (typically created in Excel or a similar tool), but what you typically end up seeing is a graph that is kind of all over the place. If you are a small company using cash, rather than accrual, accounting it is even worse with the cyclical nature of a cash accounting system. In any case, it is very difficult to see much in the way of trends. What can you do to get around this issue and really be able to see what is happening in your business? Read the rest of this entry »
A lot of readers on this site know us and know how hard we are working to get our product ready to bring to market. We’re out there discussing the product with a wide variety of people and getting really positive feedback. I’m really excited about the prospects for our success and look forward to showing it off to all the people that have expressed an interest.
This post is a short follow up to one I did a couple weeks ago (Use Ratios to Track your KPIs). In that post, I touted the use of the 3/12 and 12/12 Rate of Change ratios as being a universally alternative (and oftentimes better) way of viewing metrics within your organization. Read the rest of this entry »
