During this time of uncertainty, business managers must have the ability to cut through the noise so they can see what’s happening and understand the changes taking place in their businesses. Accurate and timely data will help you decide which areas of your business are critical and where to focus. Full visibility of your operations allows you to determine data trends so you can make fact based decisions and rebound faster.
data trend 1: day sales outstanding
Days sales outstanding is the number of days change in accounts receivables (AR), average days out.
These data points should help business managers understand the deviations from “business as usual,” and as they review the information, they should consider the slope or rate of change. Specifically, the slope indicates how quickly a trend is moving in a certain direction, and if the slope is steep, it’s likely it will be going in that direction for a while.
data trend 2: bookings: percentage of change to order back log
Equally important during this time is not just comparing a current period to a previous period. Rather, companies should be reviewing multiple comparisons because they will want to know how data points impact new data.
As you track change, look at comparisons to see a trajectory, such as demand forecasting and average days to pay. In the current business climate, historical data and backward-looking metrics can be somewhat limited in their value.
data trend 3: percentage of change invoiced sales volume
Decision-makers look at percentage share of total because they will want to understand if what’s happening now is good, bad or just different. And, are there areas that companies can focus on to help them through this period?
Not only do decision-makers need to know which direction the actual numbers are going, but they also need to understand how those numbers compare to each other and how the mix within those numbers compares over time.
data trend 4: percentage of change purchase orders placed, $ volume
It is useful to track basic inventory metrics to benchmark such as product turns and return on actual inventory investment. It’s important to understand the impacts in different areas of the business. Not every widget in the warehouse is created equal, making it crucial to understand why customers are buying specific products. How much are they paying for them, and can you resupply it from your current vendors?
data trend 5: percentage of change inventory on hand, and $ volume
Managers should review what areas of the business you have recognized as the focus to keep moving forward and be strategic about where they can pull back quickly if forecasts weaken. Do you have an understanding of when to reduce inventory based on current or future demand, or will you increase inventory of certain items because of a lack of confidence in a supplier or a damaged supply chain?
As returning to a better normal is considered, it’s important for businesses to plan for how to manage operations as demand gradually increases. Just as companies track the slope during the slow-down, resetting their demand calculations and inventory levels, they will also want to monitor how shallow the slope will be as customers return.
To find out more, watch this video discussion: Key trends to monitor to rebound faster