THE FINANCIAL STATEMENTS
KEY FINANCIAL INDICATORS
ACCOUNTING ISSUES
WHAT-IF ... SENSITIVITY MODELS
TIMING MATTERS
JUSTIFYING INVESTMENT
SCORECARDS AND VALUE MANAGEMENT

Distortions

Summary of Financial Statements’ Limitations

  • transaction-oriented, not valuing:
    • brand
    • relationships
    • skills
    • systems
    • experience (what doesn’t work!)
  • what is the value of an asset – NBV (spread cost over useful life) in the financial statements but realistic?
  • what it is worth to you – or to a potential buyer
  • different value depending on how used – business model
  • encourage short-term thinking – hitting KFI target at expense of long-term success
  • easiest way to cut OPEX – stop all training and marketing
  • in a vacuum – what is happening in the market place – higher ROI but competitors achieve more
  • historical – aren’t future orders of more interest?
  • unbalanced – measure symptoms not causes (customer satisfaction, new product pipeline etc)
  • IGNORE RISK AND THE TIME VALUE OF MONEY