How to Effectively Analyze Financial Data

By Nathan Denny and Scott Axelrod

KPIs (key performance indicators) were the topic of the day at this Private Advisory Board session. How can CEOs without a background in accounting gather and analyze financial data and performance indicators? What are some best practices for utilizing KPIs in the future?


Because of poor selection in personnel (discovered in hindsight) and poor record keeping, a CEO is working to shape new processes and systems for his company. The goal is to regain confidence in the systems and processes to feel safe about selling additional services, and to better accommodate more clients with the same amount of work.

1.  Why It’s Important

Estimated financial value: $100,000

The company is successful at sales; but failure to take care of client invoicing and contracts jeopardizes those sales. Because of the sudden departure of a key employee, and the lack of a sufficient backup system, clients are complaining about surprises in invoices, missed dates and errors.

Since then, this CEO has enlisted a new accounting firm to identify additional errors and omissions in reporting, finances, and taxes.

Now, how can this CEO identify anything he may have overlooked? What advice can be get for managing accounting and tax firms? How can this problem be fixed so that it doesn’t happen again? “And how can I make sure what I am doing is the smartest thing for my company?”

2.  Clarifying Questions (Background/Understanding)

  • Who in your company is watching cash flow and signing checks for accounts payable?
  • Are you back to signing checks, or is this new accounting firm handling it?
  • Are the systems and processes related to operations or financial management?
  • Is payroll and all receivables being outsourced?
  • Is the accounting firm providing you with activity reports on their operations?
  • Does this company help by providing strategic thinking once they clean up the current issues?

3.  Suggestions (Solutions)

  • Start documenting the processes. See what can be done to bring parts of the process in house — especially check writing.
  • Put together some best practice accounting rules to better take control of this and not be surprised another year or two down the road.
  • Demand weekly reports from firm handling the financial aspects of the company.
  • Recommendations: Quickbooks;; Basecamp.

4.  Action Plan

  • Be a better manager. Document these processes better.
  • Get more educated in managing finances.


A CEO has KPIs that are based on financial and, for the most part, lagging indicators. He wants to add additional KPIs regarding customers and employees. How can an executive best identify and begin using these types of KPIs?

1.  Why It’s Important

“This issue is significant because we need to build systems and process in order to have a healthy grow rate. Knowing and understanding what is important to our customer will allow us to understand their needs and how we can continue to meet them. Also, having a better understanding of our employee satisfaction will help us better serve our customers and understand our growth needs.”

In addition:

  • The CEO started the company 15 years ago with his wife.
  • Over the first seven years, they’ve grown to $3 million.
  • This CEO realizes that KPIs are very important to build a sustainable organization.

2.  Clarifying Questions (Background/Understanding)

  • Are you doing any kind of forecasting?
  • Do you track ratios, such as wages to sales?
  • Do you know which aspects of what you do are most important to your customers?
  • Are there any industry standards or benchmarks around quality for what you provide?

3.  Suggestions (Solutions)

  • Now that data is improving, start making some forecasts. If they prove to be helpful you’ll eventually get be able to forecast further out.
  • Get good intelligence on your customers. What’s important to them? What makes you stand out to them? What can be measured here?
  • Use phone and surveys to contact customers: Survey Monkey was suggested.
  • Don’t focus on EVERYTHING: pick two or three outcomes members want from you.
  • Incentivize employees to encourage them to do better than they are
  • Recommended service:
  • Recommended book: CEO Tools.

Session date: Feb 24, 2012
Originally published: Feb 24, 2012

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