I am a big fan of using financial scorecards to measure wholesaler performance.
Scorecards monitor key metrics. Key metrics are, simply put, important numbers you should look at every day.
Think about scorecards like the dashboard on your car. What’s important? The speedometer and fuel gauge are critical pieces of information.
You need to know how fast you are going so that you stay within the speed limit (or close to it). You need to know how much fuel is in the gas tank so you don’t run out, and become stranded on the side of the road.
The gauges that measure RPMs, engine temperature and odometer are interesting, but are not essential.
Your scorecard should measure only the important numbers that you need to look at every day. What you exclude is just as important as what you include. Keep the scorecard to the critical info only.
Some examples of critical information to measure:
- Sales Growth
- Gross Profit
- Inventory Days on Hand (DOH)
- A/R collections
- …and my personal favorite…Cash Flow.
There are lots of important numbers to keep track of in the beer business, but none is more important than cash.
To measure cash flow, I use a simple spreadsheet. You can download it here.
I want to know how much cash is on hand, and how much cash will be coming into and going out of the business in the next week, month and year.
Below is a snapshot of the Cash Scorecard that I use:
I also want to know about expected future cash needs. In other words, what will we need to buy in the future, and where we will get the money to pay for it.
The key metrics: cash on hand, projected incoming and outgoing cash, sources and uses of future cash spending.
Once the key metrics are identified, it’s time to organize them into a scorecard. The scorecard summarizes the metrics and presents them in a useful way.
Ideally, the scoreboard will be easy on the eyes. It will allow you to quickly see your key metrics and how well you are performing.
Think back to the dashboard on your car. It takes a split second to know how fast you’re going. The key metric scorecard should be just as easy to use.
Wrap Up + Action Items
Scorecards measure key metrics – the numbers you need to look at every day.
Create a scorecard so that you can measure and monitor your key metrics. There is real power in defining what is most important in your business (your key metrics) and monitoring them regularly.
Key metrics are a great tool to help improve results in your beer business. Figure out what’s most important then build your scorecard. Your P&L will thank you.
