Introduction: The Overwhelming Era of Data and AI

In the era of data abundance and rapid advancements in artificial intelligence, it's easy for individuals and businesses alike to feel overwhelmed by the vast possibilities that these technologies bring. As someone entrenched in this data-rich landscape, the sheer volume of information can be paralyzing. However, I remain convinced that amidst this sea of data, companies must anchor themselves with a set of key indicators to effectively navigate the complexities of their industries.

Background: The Foundation Laid in a Two-Part Blog

Several years ago, I delved into the importance of metrics, key performance indicators (KPIs), or indexes in a two-part blog (Blog #1 and Blog #2). The emphasis was on these indicators as indispensable tools for businesses. When tracked consistently over time, they offer a quick and insightful snapshot of a company's performance. While they can never replace the need for detailed and accurate information, they serve as invaluable touchpoints, revealing both opportunities and issues that demand attention.

The Quick Glance: Key Indicators as Performance Snapshots

The modern business environment demands swift decision-making. Companies can't afford to sift through mountains of data every time a strategic choice is required. Key indicators come to the rescue by providing a bird's-eye view of the organization's health. Whether financial metrics, customer satisfaction scores, or operational efficiency indexes, these indicators act as navigational beacons, guiding companies through the complexities of their respective industries.

Unified Understanding: Key Indicators Across Departments

One significant advantage of key indicators is their ability to transcend departmental boundaries within an organization. Whether in finance, marketing, or operations, a set of common key indicators creates a unified language for assessing performance. This facilitates cross-functional communication and collaboration, fostering a shared understanding of the company's goals and challenges.

Adaptability: Tailoring Key Indicators to the Business Landscape

In the previous blog, I outlined the process of selecting relevant key indicators tailored to a company's specific objectives. The beauty lies in their adaptability – these indicators can evolve with the business, ensuring their relevance in a dynamic environment. Whether adapting to technological advancements or responding to shifting market dynamics, the right set of key indicators provides a resilient framework for decision-making.

Balancing Act: Key Indicators and Detailed Data

While the efficiency of key indicators is undeniable, they should complement, not replace, in-depth analysis of detailed data. The devil is in the details, and a nuanced understanding of specific issues often requires a deeper dive. Key indicators act as initial signals, prompting further investigation where needed.

Conclusion: Charting a Course Through Complexity

As we navigate the ever-expanding ocean of data and the transformative waves of AI, the role of key indicators becomes increasingly vital. Companies should view them as essential tools in their strategic arsenal, providing quick insights that enable agile decision-making. By combining the power of data with the simplicity of key indicators, businesses can chart a course through the complexities of today's dynamic landscape, ensuring they stay ahead of the curve.

The Authors

Bill Blaskiewicz a Partner at the Florida CFO Group has a proven ability to establish and manage financial operations and execute operating strategies.  He has a long history of improving financial information, implementing controls, and helping businesses to better monitor their operations. Check out his LinkedIn profile at https://www.linkedin.com/in/billblaskiewicz/.

Don Noble, a Partner at the Florida CFO Group and a technology expert, boasts an extensive background in financial leadership and advisory roles. Leveraging his wealth of experience, he collaborates with businesses to optimize their financial and technological strategies, fostering growth and resilience in the dynamic marketplace. Check out his LinkedIn profile at https://www.linkedin.com/in/donaldnoble/.

Contact Us

Have questions about anything discussed in this article, or are interested in what valuable insights a CFO has for your business? Conversations are free, so do not hesitate to reach out at info@floridacfogroup.com, and let us explain how our services could be the right fit for you.

If your business includes manufacturing products to sell to customers, you must have a sales and operations planning process in place.

Sales and Operations planning, often called S&OP is a cross-functional process that involves various departments in your company, including sales, operations, finance, and supply chain management. The goal is to create a comprehensive plan that integrates all these functions to ensure that your company can supply products to your customers on time, while not carrying too much inventory and ultimately meeting your financial goals.

The first step is Demand Planning which means you must forecast customer demand.  Ideally you have a good understanding of the demand based on historical data and more importantly firm orders.  I’ve seen many startups get overzealous in their assumptions about demand and buy way too much material inventory and produce way too much product that ultimately sits on the shelf or in the warehouse. 

The second step is Supply Planning which means determining the organization production capacity and available inventory to meet the forecasted demand in step one.  It’s important that you understand the lead times from order to delivery of materials as well as the production time for each product and total manufacturing capacity.  This is where a good manufacturing engineer can determine how much time it takes to set up and produce each product on the machinery and equipment available. This will also help with understanding total capacity.  Note in some cases, organizations can use multiple shifts to utilize machinery 24 hours to increase capacity.

The third step is Integrating the Demand and Supply Plans to identify gaps and opportunities and create a balanced plan. Ideally you will understand your customer demand in detail including expected delivery dates based on your promises.  Integrating production output with customer expected delivery dates is critical.  Understanding the timing of material delivery to production scheduling to finished product ready to ship is crucial.  A balanced plan will provide production schedules by quarter, month, week and day including their resulting output.

The fourth step is Execution and Control which includes implementing the S&OP plan, monitoring performance to ensure the plan is on track and making necessary adjustments as needed. Identifying the data needed and actions required for each step in the S&OP process is important as well as roles and responsibilities for each department in the process. Ideally an Executive S&OP meeting is held monthly so that Senior Leadership is very involved in the analysis and decision making.  There are many metrics to consider but my favorites are on time delivery to customers, forecast accuracy and adherence to plan. 

The bottom line is every company is in business to satisfy customers and if you are in the manufacturing business, making good on your promise for on-time delivery is key.

Get more advice on Sales and Operations Planning from Marylean Abney

Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country. Unless you’re a child prodigy, you probably weren’t a manager the last time inflation was this high—in 1982; it was 6.16%, last month it was 9.06%, today it is 8.52%.

Inflation consumes cash, eats margins, and lulls managers into a false sense of security as inflated revenues rise A company’s situation can erode very quickly, leading to takeover or bankruptcy. Business owners & CEOs who are fast to react and flexible in their approach can not only survive but prosper in this challenging environment as they seize opportunities afforded by less nimble and smart competitors. Those who react slowly or choose the wrong strategy and tactics will be weakened and may even go bankrupt.

Here are a few critical action items that Business owners & CEOs should focus on to review and manage their businesses through inflationary times:

Communication - The Business owner & CEO, CFO, and CHRO must be very public in the business and constantly share their insights and reasons for many of your decisions. 

You are changing the way your business works, and you are asking your employees to follow you on this journey. To avoid confusion, be transparent by explaining the critical business objectives. 

Cash Flow - During inflationary times cash is king. Finance should set up a dashboard that reports the KPIs that most affect cash flow and update it daily. The essential meetings in every organization should review the dashboard and take corrective action as soon as a deviation from the plan is spotted. Differentiate between strategic and nonstrategic spending.

Working Capital - Set goals for working capital and cash. Do not let inventory and receivables grow or even remain where they are today. Squeeze out every bit of money.

Continuity of the Business - Invest only in activities that ensure the company stays solvent and beats the competition.

Revenue - Grow real volume, real revenue, not inflationary revenue. Master and manage the balance sheet.

Fix your bottlenecks - They may be in production, the supply chain, the hiring process, or the ship to cash cycle. As inflation grows, any waste or friction will become more expensive.

Costs - Now is the time for cost reduction, consistent with the critical business goals. Reassess your spending habits. If inflation is making it difficult to stay within budget, take a moment to reassess your cash flow and where it is going.

Human Resources - if “cash is king,” the employees are “the queen.” They need and deserve the attention of the senior staff. And the CHRO will be under as much stress as the Business owner, CEO, and the CFO.

Compensation plans need to be changed to reflect what is happening in the company, competition, and its immediate business environment. Maximize loyalty and reward programs. HR must ensure fairness and explain the changes so that everyone can understand and accept them.

Automate - In addition to labor cost savings, automation can promote stability in an organization. Technologies like robotic process automation (RPA), workflow, and intelligent document processing can free up workers and make each person much more effective at creating value.

In conclusion, By playing both offense and defense, you have strengthened your company, making it more effective and efficient and have position your company to outpace lea-proactive competitors long after the volatility ends.

No one wants to hear this, but soaring prices on food, gas, and entertainment may be around for a while longer, likely another year or so. That is primarily due to the Federal Reserve's plans to raise rates a couple more times through the remainder of this year. If they see demand as still being high enough to call for a couple more rate hikes, then there is certainly potential that inflation could continue to creep up a bit more from here.

So, what can you do? Keep breathing and do your best to budget accordingly. Things will settle down eventually, though we may just have to get used to higher prices.