The finance manager spends around 60% of their week consolidating information-producing reports, rather than analysing the information that they’re producing. It’s all well and good having lots of data on company performance, but what, exactly, are you going to do with it?
Even with the tools that finance managers have at their fingertips these days to help process that information, organisations are still pushing them through industrial age operational practices. A 155-management report does not lend itself well to a modern, performance-driven organisation. Someone had to read that entire document to find something useful. The modern workplace is noisy, and we’re all time-poor. That report is just going to sit in the in-tray.
But if finance is brave enough to do away with those monthly reports, all of that information could prove to be invaluable. It’s all a matter of how you process it – it needs to be grounded in the reality of the business.
Breaking down the P&L
Let’s imagine we’re working in the finance team for a hotel chain. We’re going to start by digging into the P&L, really deeply. We’re going to look at every line – on average, 20% of the P&L goes completely unmanaged. We start with the P&L because it’s where the organisation codes and categorises itself to begin with. And for every line of the P&L, we ask ourselves: what’s driving that financial outcome?
Going through every line of a P&L would be an arduous task if done manually, so we can bring in technology to do it for us. If your tech is smart, it will also help you to flag anomalies and red flags within the P&L as well.
Now that we’ve done that exercise, we can identify areas in underperformance within the hotel chain. And we have the potential to do that at a really granular level.
Taking it to branch-level
So let’s imagine that at our Birmingham location, its staff costs are higher than at other hotels.
We can see that Birmingham has 20 staff being used to maintain 20 rooms. But at our other locations, 15 staff are maintaining the same number of rooms. If we can get that information into the hands of the hotel manager, we can see some real-world results from that performance analysis.
Let’s stick with the Birmingham location. Its travel expenses are way out of whack with every other location as well. So we flag that again with the hotel manager, they put a plan in place to reduce that location’s expenses. With the right tools, you can track that plan over time, to make sure that Birmingham’s expenses comes into line with all of our other locations.
What we’ve done with both of these examples is taken an instance of financial variance and analysed the operational factors that have driven it. We’ve then turned it into a tangible opportunity that can actually be applied to our workplace.
Top-to-bottom performance management
This is a very simple example of how modern performance management could work for your organisation. We need to find insights at a very granular level and map them to operational performance. Then the value of the work that we are doing as finance professionals becomes immediately visible to managers across all levels of the business.
Every single business will have a performance management process. Within that performance management process, managers will start the week by saying: “What am I going to focus on this week?”
With a modern, performance-driven company using the right tools, an area manager can look at their table of actions, look at which have been completed, which need to be worked on and compare that to other departments or locations within the organisation. It encourages more collaboration and delivers concrete results. It gives people from the top to the bottom level a view on what’s driving performance, and their part within it.
This article was co-authored by Christopher Argent, Generation CFO and Phil Thorne, CFO at Quorso.
Quorso’s platform is designed to make granular, operations-linked performance management easy for businesses of any size. Visit Quorso’s website to discover more.