Sunday 30 September 2007

Business Goals & Drivers


"What are your business goals? What drives your company?" These might seem to be odd questions for someone implementing your accounting software to ask, yet the answers to them will make a major difference to the success of your new system.

The most famous acronym in goal setting is "SMART":

  • S - Specific
  • M - Measurable
  • A - Attainable
  • R - Realistic
  • T - Timebound
Let's focus on Measurable. If you know what your goals are, you can ensure that your accounting system is set up to measure them. For example, let's say that one of your goals is to get 50% of your sales from new customers and 50% from existing customers, but your accounting system just has a single account for sales. Measuring your progress towards this goal could be a tedious process of downloading all the year to date sales to a spreadsheet and then manually divided into "New" and "Existing". If you build your goal into your accounting system, you could have separate accounts for New Customer Sales and Existing Customer Sales and the invoices could be coded properly at the time of sale so that it becomes easy to monitor your success.

Business drivers are also an important part of system design. Simply put, they are the economic events which have a profound effect on your results, such as changing exchange rates or fluctuating commodity prices. When a client manager said to me, if our costs go over budget, it will be due to these four things, I was delighted, because I could make sure that separate accounts were created in each of those four areas so their effect could be isolated and analyzed.

What drives your business and how do you measure success?

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