1. Performance monitoring and reporting
Alex Ball,
Director, Astus Services Group NZ
12 May 2014

2. A changing role
CFOs and Finance teams are now required to provide better understanding of overall business performance.
In other words, for many entities, the Chief Financial Officer is now the Chief Performance Officer.
This requires financial teams to deploy and maintain robust performance management, monitoring and reporting frameworks
And, as importantly, for finance folk to speak the same language as their business colleagues

3. Performance Management Cycle
Monitor
Act
Plan
Strategise
Goals, Strategic Objectives
Budgets, forecasts, Initiatives
Reports, Dashboard, Analytics
Interpret, Decide, Act, Adjust
Alignment of performance with strategy is key
Strategy, key objectives and business plans are set
Monitoring requires robust, consistent measurement of integrated KPIs and metrics
This provides for timely and more informed decisioning to minimise execution gap

4. Criteria for KPI
Businesses typically can and do monitor a significant volume of management information.
Management should focus on a handful of indicators – measures that matter, or KPIs
A KPI measures performance against a goal and is usually aligned to a strategic objective

5. TYPICAL Types of kpi Financial vs Non Financial
Leading (driver) vs Lagging (outcome)
Quantitative vs Qualitative

6. Non financial indicators
Changing the conversations
Managers manage using business drivers
What gets measured gets managed
Aligns Finance and line management
Mixing desk concept

7. Identifying drivers Non-financial Financial EBITDA Call centre FTE
Calls answered
Quantity of calls
Acquisitions
Conversion rate
Connections
Non-financial
Financial
Grade of Service
Churn
Revenue
Recontract rate
Gross margin
ARPU
CoS
EBITDA
Opex

8. A range of measures Financials: Key financial KPIs
Profit and Loss
Cashflow
Balance Sheet
Key financial KPIs
Cost To Acquire
Cost To Serve
Debtor days
Capex spend vs budget
Key initiative progress
Status and spend metrics
Non financial KPIs:
Call abandonment rate
Churn
FTE
Sale conversion rates
Market indicators
Net Promoter Score
Brand Awareness
Market Share movements
Other indicators
Engagement scores
Unplanned staff churn
Complaint metrics

9. dashboards The cascading principle: Strategic (senior management)
Tactical (business unit)
Operational (team or individual)

10. New areas of business Identifying the measures that matter
Business Case?
How can these KPIs be measured?
How robust are our information gathering, processing and storage systems and processes?
Statistical variation of data – do we understand it?

11. Linkage to forecasts
Rear view mirror only useful if using the windscreen
Present YTD with updated forecasts
Link YTD themes to forecast risk (and strategy execution)
Identify actions

12. Linkage to business planning
Performance reporting should capture issues and learnings to use in business planning, including:
Revised correlations between business drivers
Revised margin settings
Improved understanding of seasonality impacts
Projects with amended revenue benefits, opex or capex needs
Revenue benefits, opex and capex for projects due to complete before or during next financial year

13. Traditional financial reporting
YTD
Company
Actual
Budget
Variance $m
Division A
15.7
16.1
-0.4 
Division B
22.2
22.5
-0.3
Division C
18.5
18.1
0.4 
Total Revenue
56.4
56.7
CoS A
8.6
8.8
0.2
CoS B
11.1
11.3
CoS C
10.1
9.3
-0.8
Total CoS
29.8
29.4
GM A
7.1
7.3
-0.2
GM B
11.2
-0.1
GM C
8.4
Gross Margin
26.6
27.3
-0.7
GM %
47.2%
48.1%
-1.0%
Labour
8.3
8.5
Advertising
0.8
1.1
0.3
Other
3.9
4.4
0.5
Total Opex
13.0
14.0
1.0
EBITDA
13.6
13.3
EBITDA %
24.1%
23.5%
0.7%
Revenue
Revenue unfavourable to budget by $0.3m with A and B unfavourable while C favourable
Gross Margin
Margin unfavourable by $0.7m or 1% with A, B and C all negative
Opex
Opex favourable to budget by $1m across all categories
EBITDA
EBITDA favourable by $0.3m or 0.7% driven by opex improvements despite shortfall in GM

14. PERFORMANCE Reporting
YTD
Company
Actual
Budget
Variance $m
Division A
15.7
16.1
-0.4 
Division B
22.2
22.5
-0.3
Division C
18.5
18.1
0.4 
Total Revenue
56.4
56.7
CoS A
8.6
8.8
0.2
CoS B
11.1
11.3
CoS C
10.1
9.3
-0.8
Total CoS
29.8
29.4
GM A
7.1
7.3
-0.2
GM B
11.2
-0.1
GM C
8.4
Gross Margin
26.6
27.3
-0.7
GM %
47.2%
48.1%
-1.0%
Labour
8.3
8.5
Advertising
0.8
1.1
0.3
Other
3.9
4.4
0.5
Total Opex
13.0
14.0
1.0
EBITDA
13.6
13.3
EBITDA %
24.1%
23.5%
0.7%
Debtor Days
Month 6
Month 5
Costs to acquire A 24 22 
1.2
1.3  B 31 33
1.4
1.5 C 38 34
1.6
1.7
Acquisition
Churn
2,455
2,345
458
570
3,788
3,670
790
590
2,567
3,650
1,459
890
Sales calls answered
Conversion Rate
18,005
17,500
14%
13%
16,420
17,000
23%
22%
17,891
21%
Balance Sheet $m
Grade of Service
Cash
4.2
4.6
87%
80%
Debtor
57.3
54.2
82%
Inventory
8.4
7.5
55%
Fixed Assets
658.6
652.8
Re-contracting
2,764
2,500
Creditors
44.5
44.2
3,000
Provisions
5.6
5.2
2,688
2,800
Loan
158.7 -
Net Assets
519.7
511.0
Cashflow
Operations
8.7
8.2
Share Capital
130.9
Investing
-9.1
-8.3
Reserves
388.8
380.1
Financing
0.3
Equity
Movement
-0.4
0.2

15. More informed decisions
Analysis
Actions
Division C’s YTD revenue was ahead of budget by $0.4m.
However, GM% was unfavourable by $0.4m and debtor days have increased by 12% month on month. Full year GM is now at risk relative to forecast.
In addition, acquisition levels are down 34% on budget driven by a 7% drop in sales conversion rate from the target level of 21%
Churn was 64% ahead of budget driven by a major drop in GoS to 55% (target 80%) and a smaller drop in re-contracting rates.
Review C’s discount and credit settings and follow up C’s credit team performance Review C’s sales call centre FTE and post call satisfaction survey scores Review root causes of GoS issue and productivity level in C’s re-contracting team

16. summary To be a better ‘performance coach’ finance teams need to:
Speak the same business language as line management
Support the business by providing robust, consistent frameworks for measuring key performance metrics
Deliver meaningful analysis using this broader range of performance information on issues requiring management action
Identify learnings and link these to forecasted performance and future business planning methodologies