{"id":68564,"date":"2019-12-05T16:14:27","date_gmt":"2019-12-05T14:14:27","guid":{"rendered":"https:\/\/www.sage.com\/en-za\/blog\/?p=68564"},"modified":"2026-01-29T15:55:54","modified_gmt":"2026-01-29T13:55:54","slug":"analytics-in-action","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-za\/blog\/analytics-in-action\/","title":{"rendered":"You are what you measure Part 2: Analytics in action"},"content":{"rendered":"
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\n\t\t\t\t\t\t\tStrategy, Legal & Operations<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t
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\n\t\t\t\t\t\tYou are what you measure Part 2: Analytics in action\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t

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\n\t\t\t\n\t\t\t\t\"Keir\t\t\t\tKeir Thomas-Bryant<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n

In Part 1 in this series<\/a>, I discussed how the limitations of traditional performance metrics might stop your business from reaching its potential. In Part 2, I look at the different types of performance metrics you can use to complement traditional KPIs.<\/em><\/p>\n\n\n\n

Business owners might feel like they\u2019re always putting out fires. But, with better insight into their operations and processes, there won\u2019t be any fires to fight<\/mark>.<\/p>\n\n\n\n

You can do this by complementing traditional financial performance metrics with proactive, indicative, and granular performance metrics. This will show you how you\u2019re tracking against your goals, and what you need to do if you\u2019re off target.<\/p>\n\n\n\n

The three main indicative metrics are client retention, cash flow, and working capital.<\/p>\n\n\n\n

Client retention<\/strong><\/h2>\n\n\n\n

We\u2019re in the age of the customer, which means key performance indicators should include client metrics. Often, these metrics are a good indication of revenue performance and cash flow, so it\u2019s important that you understand client behaviour.<\/p>\n\n\n\n

Take client churn as an example. A high churn rate could signal business contraction \u2013 and replacing lost customers costs more than just replacing lost revenue. You also need to factor in marketing costs to attract new customers.<\/p>\n\n\n\n

Customer satisfaction surveys are useful but, as a traditional metric, the results come in long after the opportunity to resolve a potential issue has passed<\/mark>.<\/p>\n\n\n\n

To identify the clients that are at risk of churn and to turn your focus to client retention, consider these steps:<\/p>\n\n\n\n

Identify your top tier clients<\/strong><\/h3>\n\n\n\n

Analyse your client revenue, client lifetime value, and client profitability, and remember that you\u2019ll get a different value depending on how you group these elements.<\/p>\n\n\n\n

For example, clients that generated the most revenue this month may not be the clients with the highest lifetime value. But since they\u2019re regular customers, their loyalty could contribute to factors like brand awareness and year-on-year growth.<\/p>\n\n\n\n

Analyse proactive metrics<\/strong><\/h3>\n\n\n\n

What percentage of work has not been invoiced for? What percentage of projects are at risk? How many invoices were rejected? These behavioural insights are immensely valuable and can inform your response.<\/p>\n\n\n\n

Take action<\/strong><\/h3>\n\n\n\n

The clients that are most likely to churn should get most of your attention. Do you need to prioritise a client project to mitigate risk? Do you need to place an order to keep a client on track?<\/p>\n\n\n\n

Share this information with your customer service team and come up with an action plan to change how you service these clients and deliver on the experience you promised them.<\/p>\n\n\n\n

Adopt the insights throughout your business<\/strong><\/h3>\n\n\n\n

To reduce the risk of churn going forward, you might need to make some changes in your business. Perhaps you need to segment clients into groups in your accounting software, for example, by product or industry.<\/p>\n\n\n\n

Data-driven insights show you which clients are at risk of leaving. This allows you and your team to focus on nurturing those relationships. You\u2019ll also have insight into which team members are serving these clients, what projects are underway, and where clients are in the client lifecycle, so you can respond to potential issues faster.<\/p>\n\n\n\n

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White paper: You are what you measure<\/h2>\n\n\t\t\t\t\t\t\t\t\t
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Data will talk if you ask the right questions. But traditional business metrics force you to ask questions based on historical data. By then, it could be too late to act. In this white paper, we discuss how proactive, indicative business metrics can drive your strategy and operations.<\/p>\n<\/div>\n<\/div>\n<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\tDownload the white paper<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\"\"\t\t\t<\/div>\n<\/div>\n\n\n\n

Cash flow<\/strong><\/h2>\n\n\n\n

Poor cash flow management is one of the biggest causes of failure among small to medium-sized businesses. So, having insights into cash flow is crucial if you want to grow your business.<\/p>\n\n\n\n

This means having the ability to predict fluctuations in cash flow in response to shifting dynamics in your business. It means building scenarios around in-progress projects, jobs that you still need to start, opportunities that are closing soon, and more.<\/p>\n\n\n\n

When you understand how all this impacts your cash flow, you\u2019ll have better visibility into your business\u2019s financial health. Here are a few steps to getting that insight:<\/p>\n\n\n\n

Measure the right things<\/strong><\/h3>\n\n\n\n

For example, a high percentage of credit sales might seem profitable, but the cash hasn\u2019t actually come into your business yet, which could impact free cash flow.<\/p>\n\n\n\n

To get a sense of cash coming into your business, look at revenue from in-progress jobs and revenue from jobs that you still need to start.<\/p>\n\n\n\n

Know your inventory-to-sales ratio. Are you keeping too much stock on hand relative to sales?<\/p>\n\n\n\n

Build cash flow scenarios<\/strong><\/h3>\n\n\n\n

How can you improve your accounts receivable with upcoming invoices and payment terms? The more historical and trend data you analyse, the better your predictions will be.<\/p>\n\n\n\n

Take action<\/strong><\/h3>\n\n\n\n

If in-progress jobs are bringing in good revenue, consider prioritising other work. If you have a lot of revenue outstanding, think about renegotiating payment terms with clients. Encourage your sales team to tie up current opportunities before building the prospect pipeline.<\/p>\n\n\n\n

Working capital<\/strong><\/h2>\n\n\n\n

You can also increase cash flow by improving the efficiency ratios that impact your working capital, which gives an overview of your current situation. Working capital is necessary to help you pay off short-term debt or expenses, but having too much working capital means some of your assets are not being used optimally now or for the long term<\/mark>.<\/p>\n\n\n\n

Having a good grasp of your accounts receivable is crucial to monitoring and measuring working capital. How long do clients take to pay, on average? How quickly do your best clients pay versus your slowest-paying ones? Are your invoices segmented by project type?<\/p>\n\n\n\n

When your accounts receivable processes are optimised, it\u2019s easier to improve your working capital using automated billing and invoicing, understanding outstanding payments and how to restructure payment terms, and knowing when to request payment in person.<\/p>\n\n\n\n

Follow these steps to avoid working capital issues:<\/p>\n\n\n\n

Measure the right things<\/strong><\/h3>\n\n\n\n

For example, decrease your accounts receivable by improving your collection practices; know how long it takes for an invoice to get paid on average, and know how long it takes to invoice and process payment according to your payment terms.<\/p>\n\n\n\n

Identify issues<\/strong><\/h3>\n\n\n\n

Implement performance goals for the above metrics, based on appropriate values for your business.<\/p>\n\n\n\n

For example, you might not want the \u2018average days sales outstanding\u2019 to exceed your average payment terms by more than half. So, if your payment terms are 30 days, and customers pay, on average, within 45 days, this will be within your performance goals.<\/p>\n\n\n\n

Identifying trends can also help to prevent issues. For example, you might notice that a certain group of clients are typically late payers. Or clients become late payers after they order a product that has a more complex onboarding process. There might be internal processes that you can improve to avoid this.<\/p>\n\n\n\n

Take action<\/strong><\/h3>\n\n\n\n

Technology and more efficient processes can improve your accounts receivable, debt collection, and credit management practices. Also, consider renegotiating payment terms to optimise your working capital.<\/p>\n\n\n\n

In Part 3 in this series<\/a>, we\u2019ll look at how you can run a smarter, faster, more connected business.<\/p>\n\n\n\n

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Sage 300 People<\/h2>\n\n\t\t\t\t\t\t\t\t\t
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Secure, compliant, and familiar, Sage 300 People has everything you need to drive HR and payroll in your large business.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\tFind out more<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\"\"\t\t\t<\/div>\n<\/div>\n\n\n

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Get a roundup of our best business advice in your inbox every month.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\tSubscribe<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\"\"\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

In Part 1 in this series, I discussed how the limitations of traditional performance metrics might stop your business from reaching its potential. In Part 2, I look at the different types of performance metrics you can use to complement traditional KPIs. Business owners might feel like they\u2019re always putting out fires. But, with better […]<\/p>\n","protected":false},"author":280,"featured_media":451,"menu_order":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"footnotes":""},"categories":[27],"tags":[315,316,327,335],"business_type":[3],"lilypad":[],"context":[],"industry":[],"persona":[12,13],"imagine_tag":[63,53,65,57,99,84,100],"coauthors":[405],"class_list":["post-68564","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-strategy-legal-operations","tag-business-intelligence","tag-business-strategy","tag-data-analysis","tag-making-financial-decisions","business_type-medium-business"],"sage_meta":{"region":"en-za","author_name":"Keir Thomas-Bryant","featured_image":"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2019\/04\/GettyImages-736491675_super.jpg","imagine_tags":{"63":"Business intelligence","53":"Business management","65":"Data","57":"HR and Payroll","99":"HR software","84":"Midsized business","100":"Payroll software"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice South Africa","distributor_original_site_url":"https:\/\/www.sage.com\/en-za\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/posts\/68564","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/users\/280"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/comments?post=68564"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/posts\/68564\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/media\/451"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/media?parent=68564"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/categories?post=68564"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/tags?post=68564"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/business_type?post=68564"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/lilypad?post=68564"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/context?post=68564"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/industry?post=68564"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/persona?post=68564"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/imagine_tag?post=68564"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/coauthors?post=68564"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}