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© 2014 Copyright line of Astus Services Group Alex Ball, Director, Astus Services Group NZ 12 May 2014 PERFORMANCE MONITORING AND REPORTING
© 2014 Copyright line of Astus Services Group 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 A CHANGING ROLE
© 2014 Copyright line of Astus Services Group 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 PERFORMANCE MANAGEMENT CYCLE MonitorAct Plan Strategise Goals, Strategic Objectives Budgets, forecasts, Initiatives Reports, Dashboard, Analytics Interpret, Decide, Act, Adjust
© 2014 Copyright line of Astus Services Group 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 CRITERIA FOR KPI
© 2014 Copyright line of Astus Services Group Financial vs Non Financial Leading (driver) vs Lagging (outcome) Quantitative vs Qualitative TYPICAL TYPES OF KPI
© 2014 Copyright line of Astus Services Group Changing the conversations Managers manage using business drivers What gets measured gets managed Aligns Finance and line management Mixing desk concept NON FINANCIAL INDICATORS
© 2014 Copyright line of Astus Services Group IDENTIFYING DRIVERS EBITDA Opex Acquisitions ARPU Connections CoS Gross margin Revenue Recontract rate Grade of Service Conversion rate Calls answered Churn Quantity of calls Call centre FTE Financial Non-financial
© 2014 Copyright line of Astus Services Group 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 Financials: 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 A RANGE OF MEASURES
© 2014 Copyright line of Astus Services Group The cascading principle: Strategic (senior management) Tactical (business unit) Operational (team or individual) DASHBOARDS
© 2014 Copyright line of Astus Services Group 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? NEW AREAS OF BUSINESS
© 2014 Copyright line of Astus Services Group 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 LINKAGE TO FORECASTS
© 2014 Copyright line of Astus Services Group 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 LINKAGE TO BUSINESS PLANNING
© 2014 Copyright line of Astus Services Group 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 TRADITIONAL FINANCIAL REPORTING YTD CompanyActualBudgetVariance $m Division A Division B Division C Total Revenue CoS A CoS B CoS C Total CoS GM A GM B GM C Gross Margin GM %47.2%48.1%-1.0% Labour Advertising Other Total Opex EBITDA EBITDA %24.1%23.5%0.7%
© 2014 Copyright line of Astus Services Group PERFORMANCE REPORTING YTD CompanyActualBudgetVariance $m Division A Division B Division C Total Revenue CoS A CoS B CoS C Total CoS GM A GM B GM C Gross Margin GM %47.2%48.1%-1.0% Labour Advertising Other Total Opex EBITDA EBITDA %24.1%23.5%0.7% Debtor DaysMonth 6Month 5 Costs to acquire A2422 A B3133 B C3834 C Acquisition Churn A2,4552,345 A B3,7883,670 B C2,5673,650 C1, Sales calls answered Conversion Rate A18,00517,500 A14%13% B16,42017,000 B23%22% C17,89117,000 C14%21% Balance Sheet$m Grade of Service Cash A87%80% Debtor B82%80% Inventory C55%80% Fixed Assets Re-contracting A 2,7642,500 Creditors B2,3453,000 Provisions C2,6882,800 Loan Net Assets Cashflow$m Operations Share Capital Investing Reserves Financing00.3 Equity Movement
© 2014 Copyright line of Astus Services Group Analysis 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 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. MORE INFORMED DECISIONS Actions
© 2014 Copyright line of Astus Services Group 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 SUMMARY
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