Measuring The Projections

Matrix Key:  Financial Viability - Profitability - Measuring the Projections

"It is often said that there are two types of forecasts, lucky or wrong." - Unknown

Even the best business projections and forecasts are meaningless unless you compare them to your actual performance.  One of the most important facets of Financial Viability is to measure your projections, that is, to measure your company's performance against those projections.  If your results vary widely from your projections, you should take action immediately to either stop the bleeding or make necessary adjustments.  So what's the best plan for measuring against projections?

Here are four weekly actions to take to stay on top of your projections:

1. Accounting department meeting
2. Production department meeting
3. Sales department meeting
4. Estimate department meeting   

Each of these parts of your business need to constantly review their costs, labor, and time, as well as report on any unusual circumstances that will skew the results higher or lower.  A forecast is a critical tool for success, but it is just that, a prediction that will be lucky or wrong.  The proof is in the pudding, and measuring your results is a key ingredient your recipe for profit.

Are You Ready to Win?

Estimating and Pricing System

Matrix Key:  Financial Viability - Profitability - Estimating and Pricing

"And when is there time to remember, to sift, to weigh, to estimate, to total?"  - Tillie Olsen

Within the Financial Viability quadrant of the WholeLife Matrix we have included a section on the importance of  an Estimating and Pricing System.  As any good bargain shopper will attest, it pays to know what things cost in the marketplace, and what it will cost you to source materials to produce your product.  Your production cost doesn't include just materials either...time is an equally precious commodity.  You must have a clear understanding of your costs and be able to accurately estimate them if you want to be profitable.

               The four requirements of an estimating/pricing system are:

1.      You must have estimates for time and material

2.      You must be able to compare estimates to actual results

3.      There must be a system to track the percentages of time and materials used

4.      There must be a system to deal with significant variances from your estimates

If your business is not as profitable as you think it could be, review your systems for the four above principles.  An accurate cost accounting system with help you determine your gross profit margin, track your expenses, and calculate your net profit.  Estimating and pricing take time, but the potential savings can show up as big wins on your bottom line. 

Are you ready to win?