Saturday, October 1, 2011

4 Types of Essential Software Metrics for Small Businesses

Most small businesses face the problem of being reactive rather than proactive. Consulting financial or operational reports are often done at the end of given periods. It is only then that they realize the errors that were made and how to adjust for the next period.  What if its too late? 
Metrics help deal with problems in the
present , past and future.

How can a small business take control? How can the small business administrator be aware in real time of all the different aspects of his business? Its not impossible to do it manually but its quite expensive and time consuming.  The best way is without a doubt to put in place well defined software metrics.

A software metric is a tool that quantifies pertinent enterprise data. Generally, metrics will be viewed as reports but they can have different forms (alerts, dashboards, etc.). They are essential in the various business departments: accounting, marketing, operations, IT, etc..

Although everyone agrees metrics are essential, small businesses rarely use them. Why? The main reason is the fact that they are often hard to put together. It also takes time and money to do so. Therefore, the best way to help small businesses owners optimize their business is by making sure the metrics are easily accessible and available at the right time.

Here are 4 types of metrics that a business can put in place: 

1- Alerts
These metrics are alerts or notifications that are sent to the administrator and/or department responsibles to mention that a threshold was reached.

For example, an email can be sent to the administrator when the sales are beneath a certain amount or when the inventory is getting low.

2- Day to day
These metrics are made to be visible day to day by the business administrators. Generally these metrics are encapsulated in the dashboard of a daily-used software application. This metric type is essential to be constantly aware of the state of the different departments of the company. These metrics will allow the administrator to react when necessary or to question the various departments when he notices anomalies in his metrics.

An example of a day to day metric is the current business cashflow or the warehouse capacity.

3- Periodical
These metrics are reports that a software solution can generate and send to the different administrators at defined intervals (weekly, monthly, quarterly, etc.).

An example of such a metric is the quarterly tax report or the monthly financial statements.

4- Ad hoc
These metrics are important but are not recurrent or predictable. They will be consulted when needed.

For example, if an administrator notices on his day to day metrics that the monthly expenses are higher than usual, he could request to get a detailed expense report to validate why that is. Such metrics can help validate or verify business aspects when the need arises.

In an ideal world, every business would have access to all their pertinent metrics when needed.  This is far from being the reality of all businesses and especially not the small businesses. As mentioned before small businesses are more often busy cleaning up meltdowns than avoiding them. Furthermore, not all software solutions offer the proper customizable metrics or alerts to help optimize a business. Although some metrics might be pertinent for a particular business, it doesn't make it pertinent for all businesses using the same sotware solution.

This being said, even though a software solution doesn't offer proper metrics doesn't mean that there aren't ways to get the metrics through complementary of customized software solutions.

The first step is for a business to realize the need for metrics, define the most pertinent ones and find tools or help to put them in place. Software metrics will help optimize a business year in and year out.

No comments:

Post a Comment