OK, I admit it. I am a zealot...for numbers and statistics that is. So what has fueled this love for numbers and statistics? It actually stems from my love for the Truth.
Truth has several contexts but to be clear for this writing, I am defining it as “that which conforms to reality”. Now reality seems to have a lot of room for opinion, so there is that to consider. Using a big circus tent as an example, the crowd was said to be 1500 people by one newspaper and another called it a 500 to 600 crowd. This may not be a crucial number to know but certainly these cannot be labeled as the Truth, meaning the true number of attendees. However, the turnstile clicks a meter once for each entry so that provides an exact number of 1,398 attendees and can be reliably called the true number in attendance, hence the Truth... It conforms with reality.
Accurate numbers can be crucial as found in tolerances for engineering stress and load factors, number of rising and falling employment numbers, number of new clients coming in and a myriad of other statistics. Whether engineers or business managers or homemakers, they alike need accuracy because judgments involving lives and livelihoods lay in the balance.
Statistics can be dry, but when accurate they allow better decision making by informing about the need to go up, down, change, do nothing or even stop an activity associated with or predicted by the statistic. When statistics cover various time frames they can be used to establish trends. Trends are very important because the momentum will tend to continue until something acts against it to slow it, speed it, stop it etc. This can be a predictive tool and I use trends all of the time to help clients plan better.
I must point out that a statistic alone is nothing unless evaluated. That simply means that the stat should be looked at for its meaning and significance on the area or activity it represents. A deeper dive rather than just looking and noting some stat is going up or down or is flat which is kindergarten level analysis is needed. What is required is an investigation into what is driving the trend and/or changes seen and graphs help make this more clear when properly labeled and scaled. An up trending chart of the numbers of new clients is fine. But WHAT is bringing them in. Was there a new promo at work, or was there a rush of referrals after last month’s favorable article in the newspaper? Whatever it is that is driving the numbers up and creating the up trend must be isolated and reinforced if it is to continue. The same holds true for a down trending statistic and that might be even more important because a downtrend unaddressed and reversed can close a business down. If a manager sees that new clients are trending down and momentum is not reversed by positive action(s) than what can he or she expect but lower and lower numbers of new clients over time. So again, this must be evaluated and the reason(s) that new clients aren’t showing up made known. Who knows, maybe the shop smells bad or the staff is being rude or as happened to one of my clients, being completely ignored and even referred to a competitor. Hey, this isn’t Miracle on 34th St. where Macy’s referred customers to Gimbels...actually that worked out as a great PR campaign in the film so don’t take me too literally on that one.
If you like your friends to be honest and faithful, then you’ll love numbers as your friend. When properly gathered and accurately recorded, they tell you the Truth. This is a beautiful thing and not just for Accountants to appreciate but all who run any activity and care about it. Most business owners and managers do care so they will benefit from keeping a sharp eye on the important statistics and trends in their activities. These can be many or in some simple enterprises can be a few key ones. When I ran my engineering company, my wall displayed graphs of 38 key statistics that could when evaluated give me certainty of direction and results to be expected going forward. NOTE: Keep Graphs out and visible not just locked up on your hard drive for a look see once in a great while. I effectively looked daily and my deep dive weekly evaluation took several hours and I always did that alone and uninterrupted. God help anyone who came in or even knocked on my door and drew my attention away. Of course once when this happened the building was on fire...I told that person to come back when it was at my door. LOL And not just financial results get graphed but quality control items like number of highly satisfied clients or number of jobs completed on or below budget and/or on time etc. These statistics validate or indict those in charge of the areas concerned. I always gave an atta boy to managers and employees in up trending areas. Likewise, I always had a spirited talk (try spelling that COME TO JESUS) with those whose statistics were dumping. This is active management and when done, companies survive. When not done, they die.
So, if you like the Truth, forget about all the stories and tales people will tell you and look to the numbers, statistics and trends. Therein lays the Truth, the whole Truth, and nothing but the Truth...because it conforms to reality. An old adage (yet totally valid) learned in my executive comeuppance was to LOOK DON'T LISTEN. When betrayed, I always paid a price.
If you need assistance getting your important numbers and statistics known, graphed and displayed, call me. I think you will benefit and enjoy the simplicity that the Truth can bring. It becomes a matter of looking at the stats and more or less ignoring all the chatter. Consider yourself advised.
Good Luck to you.
Best,
Donn Marier
DM-Your Own CFO
ADDENDUM: In the body of the text above, I failed to mention one very very important thing. THE FALSE STATISTIC. Statistics are reported by the area or department head and at times individual employees feed their personal statistics to their supervisor etc. Reporting of statistics is deadly serious stuff. Statistics reported must be factual or mistakes by management ensue and can be very costly. Therefor, discovery of a False Statistic that is intentional not accidental is grounds for dismissal or some other nasty consequence that chills it. A False Statistic is a knife in the back of the enterprise and the one giving false statistics is an enemy.