How to use activity based reporting to effectively measure KPIs
Doug has overseen the growth of Mitchell Wilson for two decades, where his knowledge and integrity have made him a trusted partner to business owners and entrepreneurs in industries as diverse as financial services, travel, media and transport.
Earlier this month we talked about why setting KPIs is good for the bottom line and in particular the benefits of activity based reporting for SMEs. Every day we see businesses who find it difficult to understand certain processes such as the link between labour costs and productivity, peaks and troughs to determine spare capacity or the impact of input costs on profit margin. This is where activity based reporting can help. But how do you get started?
What is activity based reporting?
Activity based reports illustrate the relationship between the costs involved in delivering products or services with the day-to-day activities of the business. For a small business this may involve reporting how many hours are billed to clients each day or week, providing an early indication of profitability.
The traditional accounting process involves reporting business financials weekly, fortnightly or even monthly. Activity based reporting online – in the cloud – means users can constantly update their file, ensuring more accurate reporting in real-time.
This method of reporting is useful because when a business understands the costs involved with delivering products or services and how these differ across divisions or service types, it becomes a powerful tool for managing and improving financial performance.
How to prepare your business for activity based reporting?
The best way to start is to begin getting into the habit of thoroughly checking transactions, receipts and any other expenses involved with your business. This will provide you with a better initial understanding of the day-to-day costs of the business and will get you comfortable with tracking expenses on a more frequent basis, or as they occur.
How can an accountant help prepare you for activity based reporting?
If you’re using traditional accounting software such as MYOB an accountant can help you transition to activity based reporting.
One of the most informative management reports we prepare for clients using the Xero Accounting Software platform is an executive summary – a one page snapshot that tells you everything you need to know about your business’ performance. It includes:
- cash analysis
- KPIs achieved
- budget analysis
- debtor and creditor analysis
Accounting software such as Xero operates online and allows users to view and share interactive reports and budgets in real time, giving businesses the ability to complete business activity statement returns quickly. The platform also integrates more than 40 financial reports including profit and loss, balance sheets, management reports, depreciation schedule, foreign currency gains and losses and more on a single dashboard that can be shared with multiple users.
Timely, accurate management reporting is pivotal to making the well-informed decisions that underpin business growth and success. If you would like to start making better business decisions based on real time information, please feel free to give our team a call.