Many years ago I read a story, in which a traveller asks for help finding Dave’s Bar. The local man replies after some thought, “Well, I wouldn’t start from here”.

I have had a number of meetings recently in which the subject of how best to report on financial and business performance has been debated. Traditionally, detailed reports are presented giving chapter and verse on past activity, explaining why the results are what they were, and how the variance between budget and actual is accounted for.

All this is fine, but it leaves me asking the same question, “So what?” You know (I hope) where you want to go, so given where you are now (and it may not be where you wanted or expected to be), how are you going to get to Dave’s Bar?

I suggest that reports should spend no more than 20% on historical analysis, noting key events and any exceptional activities, and the remaining 80% on what you will be doing differently as a result of what has been learned, and what impact these changes will have on your forecast.

By reporting more on the future than the past, and incorporating lessons learnt as you go, you dramatically reduce the chances of being caught out.

This should spell the end of the traditional annual budget, and the start of regular reforecasting. Yes, it’s interesting to know how we got here, but of paramount importance is to know how we are going get from where we are now, to where we want to go, even if it’s only to Dave’s Bar.

I read an interesting statistic recently. In ACE’s recently published 2008/09 submissions from Regularly Funded Organisations, combined ‘Contributed Income’ (sponsorship, trusts, donations, and lottery revenue partnership funding) fell by over £12.6 million (11%). But this was more than made up for by combined ‘Earned Income’ (ticket sales, workshop fees, merchandising, sale of books and magazines, etc.) which rose by £52.8 million (12%).

If you have read my blogs over the last couple of years, you will know that I hold a particular view of the “recession”; it was patchy, not universal. Its impact ranged from the catastrophic (if you were in house building, car manufacturing, or banking), to the liberating (with interest rates at an all time low, many households were between £100 and £150 a month better off). Public money was drying up, but private/personal money was plentiful.

Reliance on public funding has become an increasingly high risk strategy. I speak from personal experience as the ex-treasurer of an excellent provider of arts education which closed due to withdrawal of its core funding. Other organisations I know well are also starting to think the unthinkable – what if we can’t rely on public funding anymore?

So what is Plan B?

Well, I think public funding will become increasingly scarce, and with the hoops to jump through and numerous forms to complete, it will become harder to maintain.

There has been an interesting debate on LinkedIn to do with factoring as a way of improving cashflow. What caught my eye was a comment that said “payment terms has, and never will, kill a good idea”. I see this as a clarion call to every organisation that has a good idea – if it’s that good, someone will pay for it.

The balance sheet is more important to your business than your profit and loss statement.

The balance sheet tells you what you own, how much you are owed, and how much you owe to other people. Broadly speaking, assets are those things you own, or are owed, and liabilities are those things that you owe to others.

Liabilities include things like overdrafts, loans, and debts to other people (creditors). But are all liabilities bad?

Borrowing money means you have cash to do something with. If it costs you 5% to borrow £10k, and you are able to generate a profit of 7.5% through the activities you can make happen, then you are making a profit of 2.5%. Without borrowing the money you would have made no profit at all. So a loan can be a good thing, as long as you are making good use of the opportunity.

Investments in your business are liabilities. They represent the amount you have been loaned and, as above, you need to be sure you are making the most of the cash. Even “non-profit” organisations need to demonstrate that they are fulfilling their “non-profit” objectives. Is the cash sitting in the bank, or being used properly?

Liabilities also include Trade Creditors – money owed to your suppliers. It is important that you pay them within agreed terms, but don’t pay early if you don’t need to. This enables you to do something with the money.

All business owners and managers should know how much they owe to other people. Not just so they know how much they owe, but so they know how much cash they are sitting on that belongs to others and to be thinking about what they are doing with it.

I was watching the Six Nations rugby international between France and Wales last night. At half time, France were winning 20-0. The commentators pulled up the traditional statistics, showing possession, territory, line-outs won and lost, and so on. Looking at these statistics, there was very little between the two teams, and yet the most important facts, the score, suggested that France were doing something very different to Wales.

Talking this over at half time, the difference seemed to come down to two points, France had had two lucky breaks, and seemed to be passing the ball out of the tackle more than Wales. And yet neither of these were included in the statistics shown on TV.

If lucky breaks can change the result of a game, then they should be counted and analysed. Do lucky breaks just happen? Or can a team prepare and train to spot them and take advantage of them?

In business, do we look at the statistics that really tell us what is going on? The amount of cash in the bank, or profit, are easy to measure and give us one indication of how we are doing, but they do not explain why the result is what it is, or whether it is better or worse than reasonably expected.

Whether as a Finance Director, or the coach of a national rugby team, I always look for the information and data that tells me what is really going on. Traditional statistics tell one story, but is it the most useful one?

There are statistics and lies. Can a single number ever tell the whole story?

I appeared on BBC Radio Coventry and Warwickshire this morning, to give my views.

www.bbc.co.uk/iplayer/episode/p0062shx/Annie_Othen_28_01_2010/

I start to talk about an hour and 20 minuites into the programme…

None of us knows what is going to happen in the future. And yet we are constantly making decisions that are based on what we think is going to happen in the future.

I was talking to a client today about how they should structure their companies (they operate a charity and a trading company). The answer lies in what they want to achieve, and to work backwards from there. The answer may be wrong, but the premise they base the decision on will be right.

When faced with a difficult decision, I learnt a long time ago that the best way of deciding was to toss a coin, having decided what to do if the coin lands heads up (it works best if there are only two possible solutions!). The hard bit is to listen to the little voice in your head that tells you whether you are glad, or sorry, with the result. Rather than go with the coin, always trust your gut reaction to the result.

This would suggest that we know what to do all along; it’s just that too often other factors crowd our thinking, making decisions harder to reach.

Even in business, unless there are compelling reasons to take one course of action over another, there seems to be a lot of sense in going back to the reasons why you are in business, remembering what you want to achieve, and start from there.

If there is one radio show guaranteed to make me change channels, it’s the Jeremy Vine Show on Radio 2. Not because I have anything against Jeremy, it’s because, generally, the views of the public aired in response to the issues raised infuriate me. A couple of days ago, Jeremy conducted an excellent interview with a BBC correspondent about the Afghanistan non-election – a well informed, concise, detailed explanation of the issues. This was then ruined (for me) by uninformed points of view that added little or nothing.

Much has been written about the “demise” of the Birmingham Post, and the genuine concern at what will happen to the journalists who are losing their jobs. I sincerely hope that those skilled at writing will find new employment, albeit in a different market. I would far rather read, or listen, to someone who knows their subject and can present it well, than someone who writes and broadcasts just because they can.

The proliferation of Blogs, and the ability for anyone to write when, and on whatever subject they choose, has been cited as the end of quality reporting. I would disagree. I have more faith in readers and listeners exercising their choice to read and listen to what they like, and to switch off what they don’t like.

I also believe that there is a duty for those who know what is going on to share their knowledge and expertise.

As anticipated, my last blog about a simple web site related topic like the conversion rate between visitors to your web site and the number of potential customers engaging with you (for example by completing a contact form) created quite a bit of correspondence.

The vast majority of comments emphasised complex and (to be fair) quite interesting ideas about how to get the best out of your website. But I felt they missed the point. Most businesses are run by hard working individuals who have not got time to understand and implement subtle marketing ploys.

Which brings me to the question of how you eat an elephant. The answer is, of course, a mouthful at a time. To try and take too big a bite out of a problem leaves you with bad indigestion.

You need a website for two reasons, to increase your brand awareness, and to generate sales, and not necessarily both at the same time. Whatever tactics you use to achieve your goal need to be SMART (Google this if you can’t remember the acronym!).

I believe that life is complicated enough without making it harder than it needs to be.

The next time you want to make your business better, talk to someone who can talk to you about it in simple “plain English”.

Identify the problem, break it into manageable chunks, and deal with it! Life is hard enough, without it being taxing.

I was talking with a client about the amount of business they were generating from their website. The key interface between the business and the customer is the contact form, that tells the business about what the customer needs, as well as a contact name, number and email.

A brief look at Google Analytics revealed some interesting statistics:

• In the last month, their website had received just under 6,000 hits, and
• In the same period, only 54 click through’s to the contact form had been generated by the website, meaning that
• Less than 1% of visits had resulted in a request for a contact.

This was pretty depressing, but it explained why the business felt that it wasn’t getting much benefit from the website.

By looking at each page, it became apparent that there was no obvious “call to action”. Even if the visitor was keen to make contact, it wasn’t clear how they should.

I’m no web-master, but I do understand the importance of making sure the link between you, your product, your “shop”, and your customer, is seamless.

When was the last time you asked someone to give you honest feedback about how easy you are to locate, find out about, and to buy from?

Time is money. We all know that. But do you know how much your time is worth? I recently helped a self-employed client work out this cost, and thought I’d share the process.

The starting point is to work out how much it costs to “keep you alive” each month. This should include your rent or mortgage, your utility costs, average food bill, travel costs, a contribution to a small annual holiday, and a little contingency “just in case”. Let’s say, for example, that this amounts to £1,200.

You now multiply this cost by 12 to get your annual cost: £14,400.

Assuming an average working year of 220 days, you need to earn just over £65 every day to stand still. However, that’s after paying tax. So your gross earnings would need to be in the region of £80 per day.

So assuming an 8 hour day, it costs you £10 an hour to sit still.

It might not sound much, but every hour you don’t earn means you have to earn more in the other hours. Let’s say you only earn in 60% of the time. You need to charge about £135 a day, or £17 per hour.

So when you sit down to read or do something that you are not being paid for, ask yourself, is it worth £17 per hour?