IMPACT Acronym

 

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I-Insightful

You will reach the pinnacle of insightful indicators and information when they foster contemplation and discussion, both strategically and tactically, that actually improves performance. The data and information reported regularly in a business needs to be analyzed and presented in a way that generates independent and creative thought and insight, and the company needs to create forums and opportunities wherein these thoughts and insights can be discussed, allowing the company to capitalize on them.

A few years ago I began working with a company that was receiving financial statements every month, but the entrepreneur was taking ten seconds to look at the bottom-line of the profit and loss statement, making sure it was positive, and then put them in a neat folder in his filing cabinet. He spent no time or mental bandwidth on any other part of his financial statements.

He didn’t know what to look for on his monthly reports and didn’t understand what they were saying, anyway. He was gleaning no insights about how to improve his business from his data. With some work and training, he now receives, a monthly reporting package with CFO-level analysis that immediately fosters strategic thought and insight, and his business has grown by leaps and bounds as a result, with several impressive awards and recognitions to show for it.

M-Meaningful

What are the most meaningful things that happen in your business? Every business has pivotal performance drivers that ultimately determine its success or failure. These need to be included and highlighted in the reporting functions of the company. Every employee should understand their potential impact on these key drivers, and the indicators of the business should help each employee know what they can do to improve.

A large service provider was not getting data that focused on the pivotal performance drivers that collectively determine the overall success of company. They needed to drill in on gross profit per customer, billable hours, capacity, and break-even. Within weeks, I helped them illuminate and begin reporting these critical factors. There sales are up 100% over last year, and their profit is growing even faster than that.

P-Precise

You need to be able to trust that the information you receive is accurate. If you find one flaw in the data, then the credibility of all of the data is lost and decision-making becomes fuzzy. Precise also implies the reports are showing the true performance of the company, one without wide variations from month-to-month in gross margin or that fails to implement accrual and sometimes even Generally Accepted Accounting Principles (GAAP) procedures to give the most accurate picture of actual performance, unimpeded by cash basis or other non-standard accounting and finance practices.

I could share so many examples with you of companies that struggle with accuracy, but for the purposes of this book I will limit it to just one. With lots of customers and products, this particular company’s gross margin fluctuated from between positive 60% and negative 30% each month. With correct revenue and cost recognition procedures in place, this variance dropped to less than 3% per month, which helped them know exactly where their gross margin actually was and what they could do to improve it. The result, after several years, is that they have been able to survive in a very tough industry where 75% of their competition has gone out of business. They are profitable and have a bright future.

A-Accessible

The indicators and forecasts need to be easily accessible both intellectually and physically.  Intellectual accessibility refers to avoiding large tables of overwhelming data points and, instead, use charts and graphs as much as possible. Physical accessibility is about making the information as easy to access as possible. Forcing people to have a certain kind of software or another user name and password just to access the information creates barriers instead of easy access. Most will not open the attachment to the email you send or they will forget where they saved the document. Print it, distribute it, put it up on the wall, and do anything else required to remove barriers to physical access.

Not too long ago a company asked me to help them put a financial plan together for their future. They were making significant changes to their business model and adding several complex products and financing options to their customers. The 5-Year IMPACT Forecaster™ I created had several pages of assumptions and other detail, not to mention month-by-month and year-by-year summaries and analysis that consisted of thousands of columns and rows of data. Needless to say, this report was not intellectually accessible in its raw form, requiring hours of analysis from even a trained eye to gain the insights the company needed related to cash flow and future profitability. With a few simple charts and graphs embedded into the main assumption pages, I made the projection intellectually accessible, allowing the principals to change assumptions and within seconds understand the impact on their plans. They are now on track to beat their performance from prior years with a more scalable business model.

C-Comparative

Numbers and data are meaningless without understanding the context in which they are derived.  How did the company do last month, last year, and several years ago? Which direction is it trending? How does the company’s performance compare to its industry? These and other questions should be answered by the company’s reporting processes.

Several years ago a sales and installation company needed help with receiving and understanding their financial information on a regular basis. One of their greatest deficiencies was they failed to put their performance into context with their historical data as well as with others in their industry. The insights that came from doing this helped them make changes to their staffing and compensation programs that have positively impacted the employees and the company. They have grown consistently since then, and the owners are reaping significant rewards.

T-Timely

Information is only valuable if it can facilitate the development and implementation of strategic and tactical initiatives. The more out-of-date or after-the-fact the information is, the less actionable it becomes.

A few years ago I was introduced to an entrepreneur who claimed it was impossible for his company to generate monthly financial reports until 45 days after the end of the month. I was intrigued to learn what made this small business so much more complex than large multi-national corporations that can generate their monthly information within 15 to 20 days of the month-end. We quickly helped them improve their monthly closing more than 30 days to about the 12th of the following month, and their decision-making has become timelier, too. They continue to grow and have expanded their operations into a large, state-of-the-art facility.

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