If you’re serious about managing financial performance in your business effectively, here are the four things you absolutely need to nail.
Managing Financial Performance
Let’s talk about managing financial performance. I reckon there are four things businesses need to do consistently to stay on top of the numbers, understand how the business is performing, and know precisely what to do when things don’t go according to plan.
1. Build a Proper P&L Budget
The first thing you absolutely need is a proper, well-thought-out, detailed P&L budget. Now, I know that sounds fairly obvious. Many businesses don’t have a P&L budget. And those that do often have one that’s low-grade and not well thought out.
If your P&L budget was thrown together by your accountant or lacks proper input from across the business—department heads, strategic goals, and key assumptions—then you don’t have a proper P&L budget.
The P&L budget, for me, is more of a business plan in numbers. If you approach it with that mindset, it’ll give you what you need.
Of course, you’ll lean on your finance function for help—it’s not something you need to do alone. But the outcome needs to be logical, detailed, and meaningful, not just past trends copied across.
2. Set Proper KPIs Across Functions
Next up, you need proper KPIs from all the various functions in your business.
You need the top 2–3 KPIs from Sales, Marketing, Operations, Finance, etc. These are the things that must be delivered to hit your P&L targets—margins, turnover, and cash goals. Many businesses have a P&L budget and an idea of what they want to achieve, but haven’t gone deep enough to identify what each department must deliver to hit those goals. If you’ve done the P&L budget properly, with sound assumptions, that gives you a starting point for your KPI categories and targets. If you’re aiming to grow 30% year-on-year, how much will come from existing customers versus new business? What’s the required conversion rate? What sales activity is needed?
That level of detail helps department heads understand exactly what they need to focus on throughout the financial year.
3. Do Monthly P&L Reviews and Variance Analysis
You might have a P&L budget and KPIs, but are you actually reviewing them? You need to go through a monthly review process. Department heads must understand which parts of the P&L they own and review performance against the plan, identifying where targets weren’t met, where they were exceeded, and where future variances might occur. Too many businesses look at a P&L in isolation—only reviewing the past month’s figures without comparing to the plan.
But that’s not enough.
You need to compare actual performance to the financial plan and key P&L lines. Understand where you’ve over- or under-shot—and most importantly, why. That’s what leads to the insights you need to make better business decisions and take proactive steps to improve performance.
4. Monitor KPIs Weekly and Monthly
Lastly, review your KPIs weekly and monthly.
Setting KPI targets is one thing. Tracking them consistently is another. Why weekly? Because if KPIs are off track in week one, you still have three weeks to fix it. Too many businesses look at P&Ls six weeks after the fact—when it’s too late to take action. If you’ve got proper KPIs that support your targets, those KPIs should break down into weekly numbers. Track them regularly. Compare actuals to the weekly target. That’s how you stay ahead of issues, protect your month, and hit your goals.
If you can do these four things consistently—build a proper P&L budget, set and track KPIs across functions, review performance monthly, and monitor KPIs weekly—you’ll have the right controls in place for:
- Stronger financial management
- Better decision-making
- Fewer surprises
- And ultimately, more financial success
I don’t want you to get to year-end and be surprised by your turnover or profit. I want you to be crystal clear on what your departments need to deliver and how you’re tracking against that, every single week. Do that, and you’ll build a great business.
See you next time on Mind Your Own Business.
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