KPI Portal

How to survive the credit crunch? (part 1)

It’s without a doubt the most discussed topic at the moment: the credit crunch. Managers wonder how to achieve their targets, how to reduce the pain and, in worse situations, how to survive the credit crunch.

In the current economic situation, managers have to make their decisions as quickly as possible and therefore also need their management information as quickly as possible. On the other hand, they have to make other decisions, and therefore require other information.

In normal economic situations, a strategy is defined for a longer period with good and bad economic times, and the KPI’s are sufficient for measuring its realization during the normal cyclical movements. However, the economic breakdown we are dealing with at the moment, is extraordinary. Orders of complete industries are falling by more than 30 percent, month after month. The average manager critically wonders if his regular management information is sufficient for making the necessary decisions. He suspects that there is more to pay attention to.

Which other business topics needs to be focused on in order to survive? And how do we measure the progress of these topics?

These series of articles describe some business topics that have to be taken into consideration, including KPI’s to measure their performance.

Cost Management

Minimizing fixed costs. The higher your fixed costs, the lower your flexibility. Discuss all the fixed costs and make sure these costs add a substantial value to your business. Think about minimizing the outgoing cash flow in everything you do. KPI: Fixed costs.
Return on costs. Consider the value that recurring costs add to your organization. By reviewing these costs and eliminating those with a lower value for the organization, organizations can save a lot. KPI: Return on investment. This KPI can be used for every possible investment. Think about Return on Marketing Investment, Return on Training Investment, etc. Mind that it can be difficult to define the return (earnings).
Reliable cashflow forecasts. Certainty about working capital and cash flows is necessary. Make an overview of expenditures for the next few months and make sure you are financially prepared for them. Eliminate surprises.

For KPIs about all sorts of costs: click here.

Part 2 will be published soon.