© 2007 Mark T. Schenkel 1 Getting the Numbers You Need to Manage ETP 3700 Dr. Mark T. Schenkel.

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© 2007 Mark T. Schenkel 1 Getting the Numbers You Need to Manage ETP 3700 Dr. Mark T. Schenkel

© 2007 Mark T. Schenkel 2 Using Numbers to Manage Financial Statement Analysis Ratio Analysis  Liquidity ratios  Activity ratios  Profitability ratios  Solvency and coverage ratios

© 2007 Mark T. Schenkel 3 Using Financial Data to make Better Decisions (Journal of Accountancy, 1999) Fundamental focus must be on the balance between building sales and managing profitability. Develop Performance Measures: measures current performance (compared to historic) and helps in planning companies future.

© 2007 Mark T. Schenkel 4 Using Financial Data to make Better Decisions (Journal of Accountancy, 1999) Identify activities that, when taken together, are critical for building sales and growing profitability. Keep number of measures to the critical few that matter most. Limit to 5-8 measures to assure that managers keep focused. Link compensation to these performance measures, placing emphasis on quality rather than quantity.

© 2007 Mark T. Schenkel 5 Exercise In groups of 3-4, identify a model of the process for one of the businesses in your group from the point of initial contact with a prospective customer through the point at which the sale is “closed”. Identify key points in the process to monitor. Keep this information handy for as we move forward.

© 2007 Mark T. Schenkel 6 Getting the Numbers You Need (Inc., 1990) Draw up a dream list of numbers you would like to see on your desk each month (or each day, week, quarter, year). Include in list key ratios that tell you what you need to know on productivity and expenses. Sit down with accountant and see what other suggestions they might have (additions only, not deletions).

© 2007 Mark T. Schenkel 7 Getting the Numbers You Need (Inc., 1990) Focus on what numbers are critical to guide and navigate the company to desired sales and profits objectives. Upgrade systems and staff if needed to get numbers you need. Be Assertive. Do not accept gaps in information or unnecessary information in reports you receive. Make sure external accounting firm is right size for where you are headed over next few years.

© 2007 Mark T. Schenkel 8 Table 7.1 Sample List of Assumptions AssumptionMeasurement Technique 30 calls per sales person per month.Sales staff will keep a log of sales calls. One in ten sales calls results in proposal. Enter proposals to prospective clients in the sales activity log. One third of proposals results in order.When a customer places an order, this will be noted in the sales log. Each order averages ten units.The size of each order will be noted in the sales log. Customers make an average of one order per month. The date of each order is noted in the sales log. An average of one customer will stop ordering each month. Contact to see if this client intends to make any future orders.

© 2007 Mark T. Schenkel 9 Exercise 1.Building off of the previous exercise, identify assumptions related to each of the performance measures. 2.Develop a specific measurement technique for each assumption. Be sure to identify where you plan to get specific data/information. 3.Set goals to improve each point including specific actions to be taken.