I was driving through the grounds of a conference center last week and saw a roadsign: Speed Limit – 11 Miles Per Hour.
I noticed the sign, and so did one of my kids. “Dad, why is the speed limit 11 miles per hour? That’s kinda weird.”
I told her that it was kinda weird, and that was the point. If it had said 10 miles per hour or 15 miles per hour, most people wouldn’t pay attention.
There are some signs in accounting data that should stand out to us too, and make us pay attention:
- Decreasing net income over comparable prior-year period
- Decreasing margins on key products or services
- Steadily decreasing cash
- Increasing age of receivables
- Decreasing revenue per employee
There are more. But these should get an owner’s or manager’s attention. Stop, look, and listen to what your financial reports are telling you.
What indicators of financial performance really get your attention?