I wrote an article some time ago (published at www.flyingsolo.com.au) in which I looked at some of the issues around measuring business performance.  In that article – almost as a throwaway introduction – I wrote:

“In other areas of life this [measuring] is taken for granted: think of how sportspeople obsess over their times run, heights jumped, runs scored and so on.”

I was reminded of this a few days ago when I went to see the movie “Moneyball” (which by the way is very enjoyable).  The movie charts the story of the relatively poor (at least by the multi-million dollar standards of US sport) Oakland Athletics baseball team in 2002 as they adopted a new system for selecting players (Wikipedia has good artciles on both the movie and the “sabermetrics” system the Oakland A’s adopted). 

Rather than relying on the “expertise” of club scouts, they turned to an analytical approach of assessing a series of skills – measures such as (and whilst I sort of get these measures I am sure they mean far more to fans of baseball) “walks”, “getting on base” & “avoiding strike outs”.  From this analysis they picked up players who were undervalued (based on these statistics).  For the record they got to the playoffs in 2002, although this article in not about the outcome but the process.

I have long been fascinated by the post-match analysis by sports people from a whole range of sports.  Their emotional state (in crude terms happy / sad) is determined by the outcome (win / lose), but when they are asked to comment on the game they have just played they almost never mention the result.  They talk about the things they can control, the things they are coached to do in the game.  They talk about yards gained, sets completed or tackles made (rugby league), first serve percentages and unforced errors (tennis), fairways hit and putts taken (golf) and so on.  Their focus is on the things they can control that – if done right – will lead to success.  They focus on a similar range of measures to those used by the Oakland A's.

It seems to me that this is a lesson that the business world can usefully learn from sport.  All too often when sport is discussed in a business context it is in terms of the result (winning or capturing territory) or about commitment (“taking one for the team”, going "that extra yard" and so on).  But this misses the point that these are not what the sports people themselves discuss – whilst any (team) sportsperson will trot out the cliché of how the team result is more important than their performance, you know that come Monday morning when they debrief on the game with the coach they will be focusing on their personal contribution to the result.

In my own business I am developing a series of metrics to measure the indicators of performance that I can infulence.  Website visits and enquiries from those visits, conversion rates on leads, client retention rates, turnaround times on questions from existing clients, meeting client expectations and so on.  I don’t think all of these metrics are quite right – I’ll keep on working on this – but I do know that judging my staff based on the profit the business makes (the result) does not make sense.  Even judging my own performance on the basis of profit doesn’t give me any insight as to why the business has done well or less well in any given period.

Instead I need to judge the team (and myself) on performance against those things we can control.  If I can get that right I can continue to attract and convert new clients, to provide great service to (and hence retain) existing clients and to provide an interesting and rewarding environment for my staff to work in (hence enabling all of the above) – and if I manage to do all of that the results will follow.

What are the indicators of success in your business (other than the bottom line)?  What do you measure to know if your business is performing well?

News from my desk in Ouagadougou

My first week in Ouaga has disappeared in a flash, every day a new experience and something new to learn. The weather seems to be getting hotter with very little relief.  Although one exception was Thursday morning when I woke up during the early hours by the sound of thunder followed by pouring rain.  I opened the windows to the most beautiful freshness…everything was cool and bright.  But apart from the following day when it was distinctly cooler, the heat is inescapable even during the night which means using the air-con and/or fans.

Things in the office have also been interesting with each day passing without having spent much quality training time with the staff.  Of course politics always plays a part and as an outsider I have no idea what’s going on.  I keep in touch with my boss via SKYPE and when we discuss the various questions which arise in relation to how we can adapt Xero to provide the required local information Rhys can go on-line and look at the company I’m working with to see first-hand the situation.  Thankfully Xero is very adaptable so for example when a supplier invoice requires both VAT at 18% and WHT at 5%, Xero handles it well and the in-house accountant is very happy with the resulting invoice which can be printed and attached to the cheque.

Yes, everything is paid via a handwritten cheque here in Ouaga…that is unless it’s paid with cash of course.

An African weekend

My stay at Le Karite has been made more enjoyable with the company of Telse, a German woman who has lived and worked in various African countries for 10 years.  Telse has bought a car which means we can have a look around Ouaga.  Saturday night we decided to go into the centre of town to find the live music venue in a park somewhere that one of my local colleagues had recommended.   This is definitely the climate to eat and relax outside and we took advantage of the beautiful balmy night to order wood-fired pizza and a kir (French aperatif  of sauvignon blanc and crème de cassis).

Monday

Started in the office late on Monday morning as I was feeling a bit poorly, but I had contacted the accountant and by the time I arrived she was in the process of reconciling the Petty Cash account in Xero.  At the same time Judicael, her assistant, was preparing upload files for other various Advances.  Things seemed to be progressing well and it seemed beneficial that I wasn’t there the whole day.

By the time I arrived Sidonie had questions for me so we worked through a variety of things including creating bank rules in Xero, adding more details to transactions whilst in the process of reconciliation, creating new general ledger account numbers and generating bank reconciliation reports.  All really easy to do, and covered in just an hour or two of training.

Being in the same office as Sidonie and Judicael created a much more relaxed working environment and they love to joke and laugh about things as they work. It becomes more fun and due to the slow internet connection it doesn’t really interrupt the work.  I think this is pretty common in Africa and quite different to some of the offices I’ve worked in in Sydney.

And now to my last day in Ouaga - unfortunately my last dinner at le Karite Bleu was low-risk (tummy still not too good), so no Dorade, or Merou or the Capitaine which are all beautiful fish served BBQ’d with a sauce.  It’s plain white rice with some peas for me followed by peppermint tea.  But it was so lovely eating outside with Telse in the tropical garden after having enjoyed a magnificent full moon rising earlier in the evening.

Flying back to Sydney tomorrow, from where Viridity will continue to support this client on Xero.  It really is amazing to see how well Xero copes with what is a large and complex business – the owners love it, as they can keep on top of their business whether they are in the office, elsewhere in Burkina Faso, or (as at present) back in Aus. 

Not every new client comes with a trip to such a wonderful destination, so this one really was a bonus.  So much of the work we do with clients on Xero we can do remotely, but sometimes nothing beats getting on site, and I know this trip has laid the foundation for working with the client ongoing.  And best of all the cost of the trip (in both time and money) has been validated by getting such great feedback from the client, who is delighted with the work we have done. 

Now if we could just find a new client who needs onsite training in Paris  . . . .

To quote Lonely Planet ‘One thing Burkina-Faso lays claim to is having the capital city with the coolest name – Ouagadougou. And here I am on my first day in the job for Viridity and our client SGSS. Hot and muggy and at 8am the sun is already high in the sky.

A driver from SGSS picks me up and he navigates the wide roads which are a chaotic mix of motor-scooters, bicycles and motor vehicles...scooters way in excess, reminds me of Rome transported to the dessert. This is certainly a long way from the ordered and reliable roads of Sydney.

Head office of SGSS is situated in a one-story spacious building which feels more like an old residence than an office. There is a full-time security guard standing outside ready to open and close the front gates, always with a beaming smile and ‘bonjour’. Outside there’s also a donkey with a cart attached full of tree-offcuts...they provide cheap labour.

We’re at the end of the wet season so everything is still relatively calm with most of the SGSS workers not due back for a few days. I have an office to myself and thanks to the wireless network I can easily work on XERO and Gmail using my Macbook. The hours of work for the office staff are 8am through to 6pm with 2hours for lunch, which is provided by the company.

I feel quite at home in this relaxed environment and after an initial meeting with the local bookkeeper I start work on spreadsheets to create upload files for the various Cash Advance accounts. Due to the nature of business in Africa, the geologists and engineering staff take cash advances with them when out in the field. Unfortunately, these various cash advances haven’t yet been reconciled in XERO but I’m relieved to find a well-ordered paper trail to support the payments and some excel summary spreadsheets. The currency in Burkina-Faso is around 450 XOF (West African French francs) to 1 USD which creates scary looking numbers from a large volume of small-value transactions - petrol, juice, SIM cards, lunch at Mummy’s Kitchen, road tolls and ‘Courtesy Payments’ to name a few. I decide to sort and sub-total by account type then use the sub-totalled amounts for my import to XERO rather than importing 100’s of transactions.

We lose the internet connection for a few hours but that’s Africa. It comes back up....eventually. Everyone seems to work at a slow pace which I find a bit frustrating - let there be no rush, besides it’s too hot. I’m hoping I can get through all the work...

The major issue in relation to my scope of work is the lack of confidence shown by the bookkeeper in relation to XERO and it’s capability to provide the necessary reports for TVA (i.e. the local version of GST) requirements. At present she and her assistant use SAGE for A/P, A/R, Payroll and reporting the TVA. One of my jobs is to train and encourage the bookkeeper to input directly to XERO rather than in SAGE but she’s very concerned that it won’t do the job and wants to speak to the Tax Accountant before committing to anything. Meanwhile time passes...

A heavy downpour belts hard on the tin roof but it’s wonderful and I stop to enjoy the sound and the smell. When I leave and walk back to Le Karite Bleu guest house the roadside verges are now muddy red with puddles of water everywhere and the humidity is at sauna-level. I have to remember to buy a bag of peanuts from one of the street vendors on my way...and another bunch of bananas.

A couple of weeks ago I wrote a blog post on the importance of management reporting, arguing that all owners or managers of small businesses should be demanding high quality information to help understand and run their businesses.

A few days ago I attended my first board meeting for a new client - who happen to be a Not For Profit with an external board but the experience of that meeting is equally applicable to all SMEs.  I presented to the board the standard Management Reports out of Xero, which they loved.  I then went a step further and provided them a few edited highlights using the Spotlight reporting tool.  Just a couple of the charts I put up were as follows.



Nothing all that fancy (though there were a lot more besides this), but far more informative than anything they had ever received previously.

A number of the directors present - who are on the board because of all sorts of great skills they bring to the organisation - would be the first to admit they do not have particularly strong financial skills.  I received a number of comments that they suddenly felt as though they really understood the financial information presented, which they never had before.  This both delighted and horrified me.

Delighted because I had acheived what I set out to (of demistifying their financials) and horrified me because of how vulnerable they had all been for the months and years prior to that day.

It is really important to remember that as a director or officer of a business you have a range of responsibilities that are not lessened just because you don't receive or understand all the information you require.  So if you are not receiving an adequate range of financial reports or you do not fully understand them DEMAND them now, and make time to understand what they mean.

If you are not sure what your obligations as a director are there is a good summary of these on the ASIC website, or talk to a professinoal advisor.  The penalties for getting this wrong can be very tough!

If you think more meaningful reports would help you gain a better understanding of your business please contact Viridity.

Those of you who invest time reading my blog posts or contributions to various forums (thank you) will know that I get pretty excited at times about who gets value from your accounts.  I am very firmly of the view that the number 1 user of your accounting database should be you, the business owner. 

Yes you have to keep the ATO happy (once a quarter), yes you have to keep your accountant happy (once a year so that he in turn can keep the ATO happy), but none of that adds value to your business.  At best it can reduce some of your compliance costs. 

Running monthly management reports, spending (just a little) time reading and understanding them, and then acting on that information can massively improve the performance of your business.  I am really looking forward to the release of a number of reporting add on products for Xero, that will deliver management information to the finger tips of small business owners.

Xero already has a great range of built in reports, but what we are now about to see - made possible by changes to the Xero API - is a variety of tools aimed at reporting graphically, at business intelligence solutions, and at budgeting and forecasting. 

This is why I became an accountant - not to worry about shaving a few bucks off last year's tax bill, but to work with business owners to help them run their businesses better.  And having the right tools available makes the job so much easier, not to mention so much more fun!

Watch this space for details of new products as they get released.  Exciting times!