Successful business intelligence (BI) projects are those that start by defining the business problem they are trying to solve or goal they want to achieve (e.g. we want to increase sales by 10% this fiscal year).
Out of this you will then look at the business questions you need to answer to support your objective (e.g. how are sales performing across different territories?). From this will flow the numbers you need to see to answer these questions (e.g. booked revenue, number of sales, forecast revenue, etc).
Anything you decide to measure should be actionable. When you define actionable measures, this often leads you to track measures that are expressed as ratios or percentages, where it is easier to see any changes (e.g. average order value, return on investment, inventory turns, revenue per head, etc).
When you get your measures right, you will see that they don’t work in isolation. In fact, it is the combination of your measures working together that gives you the big picture view of how well your business or business area is performing.
Consider an organization with a focus on cash flow. Two of its measures are Days Sales Outstanding (DSO) and Average Order Value.
Their target is to keep DSO under 45 days. Any increase in this figure is bad and requires action.
They also want to keep their average order value in the range of $26,500 to $27,500. Any deviation above or below this range requires investigation.
Let’s say DSO creeps up towards 60 days, so they need to take action. However, to guide their action, they first need some additional information.
Have they taken 1-2 large orders, where slow payment has skewed their DSO measure? This could be identified by an increase in their Average Order Value.
In this case the next step may be to pull up a list of outstanding invoices by value ready to escalate to the sales team and have them call the customers in question to ensure prompt payment.
However, if Average Order Value decreased, then this could indicate that they have processed more transactions – perhaps in response to a successful marketing promotion aimed at increasing market share.
In this case, the next step could be to look at the headcount in their accounts receivable team and their productivity per head. The action could be to take on some temporary agency staff to increase capacity in the team and speed up the collection of outstanding payments.
Take a look at this example interactive, Accounts Receivables dashboard (created with DecisionPoint™) which shows one way how this information could be presented to the finance team to track aged debt and keep on top of late payments.