A key element of the health of your business is financial control. In essence, financial control is achieved by having a comprehensive system of financial measures and controls will provide the necessary analysis and tracking of your key financial data.
One of the tasks I enjoy the most is the monthly management review process. Management reviews are an opportunity to meet with my clients and go through their monthly (sometimes quarterly) numbers, the performance of their management systems, and to update their budgets going forward.
I enjoy these meetings: they are vital for the health and progression of any business. I have talked about budgeting previously. Budgeting empowers you to make the right financial decisions to achieve your business goals. However, a budget is useless unless you continually reference back to it with actual results and updating it with relevant information. Budgets are a living document: they require these regular reviews to keep them relevant and useful.
Monthly management reviews can also take on a bigger role. They can and often do encompass a swathe of topics relevant to the business owner. I have assisted clients in reviewing staff performance, staff capacity, document reviews and financing issues, to name a few.
What typically happens at a monthly management review?
Most review meetings start with general chit chat but quickly progress to a review of the numbers from the past period. We look at key metrics and compare them to industry standards and historical norms.
We will discuss any discrepancies to the budget and the reasons for these. We then update the documents (both P&L budget and Cash Flow budget) to reflect the most up-to-date information.
Once the current budget is updated, the conversation moves to other areas relevant to the business at that time. We may talk staffing, we may talk expansion. Cash flow often is discussed, which inevitably raises the question of debtors and creditors and how they are being managed. The list of topics is endless.
What results can I expect?
The desired result of monthly management review meetings is to keep the client abreast of their numbers and what they mean, to keep them focused on their goals, and to give them guidance regarding any other relevant issues they may have.