Scorecards lead to profits

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Truck and trailer repossessions and liquidations in the third quarter of 2005 increased 188 percent compared to the same quarter in 2004, according to Nassau Asset Management. “There is no question that rising fuel costs earlier this year made it harder for truckers, construction companies and other firms to do business,” says Edward Castagna, Nassau’s president.

Schneider National updated its fuel surcharge program for owner-operators and fleet owners and will pay fuel surcharges on both empty and loaded miles. The new program includes a payout table that Schneider says is easier to understand, with the payout rate based on price bands relative to the weekly Department of Energy fuel price. Schneider also is eliminating the lag in paying out the surcharge and now will pay both the loads and fuel surcharge on the same weekly settlement.

Knight Transportation’s board declared a 3-for-2 stock split on all shares of its outstanding common stock that will take effect in the form of a stock dividend. The stock split will entitle all shareholders of record as of the close of business on Nov. 30, 2005, to receive one additional share of common stock for every two shares of common stock held on that date.

New Jersey voters approved a measure to fund a new diesel emissions reduction program by reallocating revenue from the state’s corporate business tax. Ballot Question No. 2 provides $160 million over 10 years to retrofit more than 30,000 state buses and trucks. The vote also includes funding for New Jersey’s anti-idling enforcement program.

Accounting is evolving into something entirely new. No longer will pages of dry columns of numbers be acceptable for internal management reports or even outside financials.

Controllers, chief financial officers and accountants may be the financial watchdogs of a company or organization, but increasingly they also are called on to lead the effort to measure company performance or prepare performance scorecards. This is one of the most critical tasks in any organization, and it gives the staid old accounting or finance profession a chance to shine in a new role in helping drive the success of an organization.

Poor assessments of the activities that determine financial performance can lead to trouble, so financial professionals often aren’t comfortable in this key new role. There isn’t much “official guidance” on what are the best practices, so professionals must exercise considerable creative thought and endure trial and error. And until recently, controllers and CFOs have not had access to simple and inexpensive software tools designed to help them systematically measure performance.

Regardless, measuring key performance indicators (KPIs) and acting accordingly are central to financial success. In May 2005, I wrote about 10 steps to making more money. One is to target your results. Another is to monitor progress monthly with a financial navigator. Both relate directly to KPIs and company metrics.

Mark Werlinger, chief financial officer of Truline Corp. and Estenson Logistics of Nevada and California, uses a variety of KPI displays with his managers, helping measure and drive the things they each can control.

“For frontline managers, we must explain the need to worry about costs, and controlling them. If costs go up 1 percent, then our bankers will say ‘your margins are slipping – why?’ Since we rely on our lenders and we need them, we work to give our managers tools to stay on top of their costs.” And managers also must assure lenders that the company is watching key metrics carefully and comparing them to a goal or target range.

With senior managers, Werlinger provides various Excel charts but also a P&L on a percentage basis, and focuses on what they can control, such as maintenance costs, fuel, driver pay, etc. He uses graphs to display costs as a percentage of revenue, so that everyone clearly sees trends developing and can make quick adjustments. And the managers – as well as the bankers – love to see them.

What about system software? Werlinger has used both sophisticated and simple software, and the challenge of getting automatic KPI reports varies depending on the package. Rarely does one system track all that is needed as each business is unique.

Enterprise software leaders all have added dashboard or KPI modules in recent years, but not all give you everything you need automatically. You may be faced with combining automated reports with customer spreadsheets in order to build effective presentations of data.

To master financial navigating, you must develop skills in designing KPIs; set up understandable charts, graphs and reports; quickly prepare PowerPoint slides to communicate results; and use new tools like Microsoft Meeting. Most importantly, you must handle intense questioning in monthly review meetings.

Werlinger cautions patience. “Take baby steps, then work toward walking, and eventually you’ll be running.”

Resources
“The 10 Ways of KPI” by Wayne Eckerson, July 2004, Application Development Trends
magazine: website

CEO Tools: The Nuts-n-Bolts of Every Manager’s Success, book & CD by Kraig Kramers: website.


Western Express registers IPO
Western Express has registered for an initial public offering on the Nasdaq exchange at an undetermined future date. Through the first six months of this year, the Nashville, Tenn.-based company, led by Chief Executive Officer Wayne Wise, had revenue of $120.3 million and earnings of $1.5 million, an improvement over the $107.2 million in revenue and $617,000 loss for the same 2004 period. Wise and his wife, Donna, own 90 percent of Western Express Holdings, which was incorporated in September.

From 2000 to 2003, the company bought Alabama Dixieland Express, Proline Carriers and Prostar Logistics, J-Mar Trucking Inc. and Deaton Inc. through acquisitions, according to the filing.