As we encounter various business leaders, we remain baffled at the lack of proper financial analysis being carried out to evaluate and track business performance.
Businesses are often sitting on a mine of data that is readily available in their monthly or quarterly management accounts, which however is not put to good use. Having worked with several businesses we have managed to outline a couple of typical examples:
(i) those solely and exclusively focused on ‘Turnover’, with little concern as to whether this turnover is profitable. This may be pushing the business into incurring additional costs and risks.
(ii) some are focused on ‘Gross Profit’. They are aware of their ‘Turnover’ and ‘Cost of Sales’ and are only interested in that.
(iii) others are concerned with cutting costs, especially any type of overhead, without evaluating the effect on turnover thus pursuing false economies.
At EMCS, we have developed a simple, yet effective modelling system. We assist family businesses and SMEs, in attaining a 360 holistic view of their business from a financial perspective. It is a model that allows businesses, to get simple excel based dashboards, delivering turnover performance, gross profit margin performance and contribution performance, viewed in a simple trend analysis basis. The information can be drilled down to every single product or brand level but also structured in a single holistic view.
When this exercise is combined with past financial accounts, we can establish the variable component of overhead costs. This helps business owners and leaders to truly understand which products or services really leave a sustainable contribution towards their fixed overheads. Moreover, it aids business leaders to understand the level of contribution needed to cover their fixed costs and in turn where the real savings lie thus outlining the gains over their fixed costs.
This exercise takes on the mind-boggling load of going through tons of data and reports. Past experience has shown that financial analysis is a good start to identify the issues affecting your business, which in turn, leads to a more extensive business audit with strategic and structuring advice to achieve a better performance of your business.
Get in touch to find out more about our financial analysis service, drop us an email on info@emcs.com.mt
