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?

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One thought on “Speed Limit: 11 Miles Per Hour

  1. There’s a very general case of a sign you should not ignore: After nearly three decades (yikes!) of keeping books, sometimes I get the feeling that my late father (Chartered Accountant and auditor) would describe as ‘The ink just didn’t smell right’. Too often I have dismissed it and carried on, only to discover later that there was something wrong.

    Don’t hesitate to obey those little niggling voices that say ‘Take another look at that, it isn’t as it should be’.

    Reply

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