Why Measure Expenses by Strategic Objective
As an operations expert, one of your most vital tasks is helping your CEO manage the dollars—dollars in (sales) and dollars out (expenses). Where you shine is helping them be strategic about where the company puts those dollars. Here are three reasons why you need to measure expenses by strategic objective.
Reason #1: It’s Easier to Measure ROI and Set Smarter Goals
When you think of your business in terms of strategic objectives, you’ll set goals that are related to those core objectives—and many of those goals can be linked directly to your financials.
For example, let’s think about marketing. Let’s say that one of my goals is to get a certain ROI on a marketing objective, like my Facebook ads. We need to tag that and link it back to the financials so we can see the dollars for the year, or the quarter.
What if we can’t see an ROI on some of our marketing efforts right away? Things like blogging are longer-term strategies, so we need to look at them over time. If we can see it over three months, six months, or a year, we can see our total spending and calculate the return.
With enough data over time, you can calculate the ROI based on how you see it for that goal: sales dollars, customer leads, traffic, or whatever benefit it is that you’re aiming to gain from that investment. It just helps you more quickly pull those numbers together, whether you want to base a dashboard upon it, or do a quick calculation.
If you’re really scaling and you want to look at the numbers in more detail, you can break it down. Team members are a great example. In the accounting world, team members typically fall into a more generic cost of sales, or they get rolled up into other accounting overhead categories. But why not get more colorful (or strategic) with our reporting? Ideally all our team members don’t roll up into the same line item, because they help us serve different functions. Core people on your team play a different role than, say, a consultant that you hire for a quick project. Some might contribute to marketing and some contribute more to company-wide objectives or longer-term goals.
The purpose of all of this is to really get strategic about calling out typical expenses versus investments. Things are either investments that serve a specific purpose, or they’re an “other.” That “other” category should be small; things that don’t have a home relating to a strategic objective need to be reviewed and evaluated.
Related: Learn how to calculate our favorite KPIs for each strategic objective in this video:
Reason #2: It’s What Management and Decision-Makers Want to See
Management and decision-making visionaries in a company don’t tend to love digging into accounting and financial statements, extracting all the details that you and I (as data nerds) might love seeing. They need those numbers, but they’re using them to ultimately make decisions about what to take action on next.
A visual financial dashboard tied to strategic objectives gives them the ability to make quicker decisions with more clarity. It’s basically hacking a traditional accounting statement to make it more usable for non-accountants. They can see how the dollars roll up to their strategic objectives in a numbers story that makes sense.
When they see that information presented in a visual way that feels familiar, they understand what’s going on without having to be re-educated about what this line item is or what that accounting term means. They’re more likely to trust that information and see it as more reliable. They can see how the data relates to their objectives and know that they have the resources to make good decisions on future goals.
Reason #3: It Saves Time on Monthly and Quarterly Reviews
As the DOO, you can advise your CEOs a lot faster and better when you’ve organized the data in a way that makes sense to them and their business goals. It saves time for you and makes you more effective in your role. It’s much quicker and easier to spot the low-hanging fruit to cut expenses that aren’t that helpful, or to see new opportunities. And that makes you look great to your clients.
This is why I’ve structured my Download n’ Done™ Profit Producer Dashboard templates the way that I have—to give you a visually concise, automated KPI dashboard that saves you countless hours wading through data. It packages the information you need to show in an attractive, functional way that helps you better communicate with your CEOs. Find out more here.