Which Income Stream Is Making You Money?

Sydney Outsourced CFO Thomas Taylor - Sunday, May 14, 2017

We often recommend better management reporting, but also, the equally important, regular time put aside each month to review and interpret the results.

This might seem like someone that's good with a hammer thinking every problem is a nail, but we have been around long enough to see good reporting as a major contributor to many a success story. And the opposite, the absence of control, all too often associated with years of bumping along the bottom.

It's important to note that good reporting does not mean complex reporting. It should be elegant. Elegant as in: “pleasingly ingenious and simple”. As complex as it needs to be and no more.

Establishing robust and simple reporting regimes, and then sticking to them for years, allows them to become part of a shared language of the organisation. There is nothing worse than needlessly chopping and changing.

But it's what you put in the reports that makes the biggest difference. Usually, monthly accounts list sales from different income streams, and that's good, but then go on to list expenses alphabetically which is of very little value. At the very least expenses need to be split up into groups of what you are spending the money for. Client acquisition, service delivery costs, etc.

Better still is when these groups of expenses are allocated to each income stream so you can see the relative performance of each one. This takes a little bit of work but not a great deal more than the work it takes to do the basic bookkeeping in the first place.

We've developed a financial model to do this. It lets you see what income streams are making money now, and what they might make in the future if changes were, or were not, made. It allows you to see when the business can employ people, as well as important KPI's like cost of client acquisition and long-term client value. Ongoing, it is a fairly simple matter to update the model when circumstances change, allowing us to give quick answers to questions down the track. We recommend you do it every quarter. 

 
Give us a shout if you want to see what that might look like for you. 
 
 

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