Monitoring business performance and managing outcomes

The starting point for managing outcomes is to closely monitor business performance and budgets throughout the year.

Finance leaders play an important role in monitoring budgetary performance to ensure that your business meets its targets and has sufficient capital to finance its activities. This allows you to anticipate any shortfalls and implement corresponding mitigating actions.

During this video, experienced CFO and CEO Stuart Trood provides top tips for how to anticipate any shortfalls:

Business leaders should implement ongoing management review processes to monitor performance against budgets. These are typically performed monthly, although you may be able to do this weekly if you have access to live information. 

Most finance leaders discuss budgets with their business on a regular basis and ensure that they properly understand it from the outset. This helps the budget to become part of everyday life and to be fully engrained in the business.

You should also discuss performance against budgets during your management and Board meetings. This helps to get everybody involved in implementing the necessary actions required to address any shortfalls.

Budgets should define how the business operates and thinks, rather than some random numbers that finance dictate on an annual basis.

Managing Outcomes

No matter how focused your business is on hitting budgetary targets, it is almost inevitable that there will be times when some numbers are missed. This may be due to unexpected market conditions, workforce issues or a lucrative new opportunity that justified additional expenditure.

Regardless of the reasons, business leaders play a vital role in helping to manage outcomes of budgetary performance during each financial period. 

As the business leader, you will be required to take mitigating actions throughout the year. These may include:

1. Creating incentives to drive strong performance against budgets;
2. Analysing data and ongoing performance to anticipate any variances;
3. Working with other departments to quantify the impact of any individual overruns;
4. Implementing policies to minimise the level of overruns that are being incurred;
5. Determining ways to offset any identified overruns with savings elsewhere in the business;
6. Identifying profit and cash flow improvement initiatives to boost financial results;
7. Re-forecasting results to determine the net impact of each variance and potential scenarios;
8. Reviewing your cash flow forecasts to check that you have sufficient cash requirements;
9. Raising additional capital to finance your business activities; and
10. Communicating the overruns to your stakeholders in a way that maintains confidence.

You need to be very proactive in monitoring results and managing outcomes so that you can implement mitigating actions whilst there is still an opportunity to influence results. This requires quick thinking and strong problem-solving skills.