Business owners and managers can never ignore the bottom line. It represents the definitive snapshot of how well a company is doing in a given point in time. While this measure provides an easy-to-understand statistic on how well your business is doing now, the bottom line does not explain how you got there.
It is a lagging indicator. To understand or to take action to improve your bottom line, you need to determine how you arrived at that number. (See my related article “Impacting Your Bottom Line,” CGI, May 2009.)
I always ask “How’s business?” Most distributors will reply that sales revenues are up or down, and talk about what has been happening to profits. These measures are important; however, they do not always answer the question “How’s business?” The ups or downs need to be backed by information that describes these results in order to fully explain how well your business is performing. This involves understanding things like company productivity and efficiency. Understanding these involves measurement — the topic of this article.
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