When numbers speak volumes to you: The joy of profit and loss spreadsheets

By

Author: Flavia

 

While I was driving today, special moments came back to me and they were almost moving.

Picture the scene: It’s night and and I am sitting at my desk in Athens, a couple of days before an important review with a big boss.
I am drawing little circles around numbers. Columns are years, rows are revenues, margins, costs, and finally profits.

YTD means year to date, how much we made so far, and BTG means balance to go, how much do we have to achieve if we want to earn our slice of bread (ie: reach our targets).
All periods are compared with the same periods of year ago.

I am preparing the questions I expect from the boss: Why is this increasing? Why is this decreasing?
I make notes of the answers and, for those I don’t recall, I ask the first of my 10 Product Managers: can you tell me why the gross revenues increased so disproportionally vs. the net revenues?

Because we gave more discounts to customers, he says.
Thank you, but why SO MUCH more?
Because we gave more coupons.
Coupons? Which coupons? But they should be reported below, in marketing activities.
No, my Product Manager says, this year finance wants them here.

 

I pick up the phone and call the Finance Director. “What’s this crazy story with coupons? This is not a smart move, it kills the gross margin, it will look like sh… awful”.
“I am sorry Flavia, but these are the new global guidelines, I can’t do anything about it”.
“And this kills comparability with previous year, too”.
“I know, but everybody will know”.
I hang up thinking, my God, every year a new rule!

 

I know what comes next… I have to recalculate the percentages “as if there were no bloody coupons” because this is what I will be asked, for sure.
I do it and I write it down in case those revenues numbers should provoke negative reactions.
Hmm, now it makes more sense in fact.

 

Then I call the second Product Manager.
Promotion expenses are up double digits, advertising are not. You know that this is not a good indicator of a brand’s health?
“But we are investing enough in media, Flavia! Here are the plans”.
Let me see.. ah, now I understand. Let’s do this: have a backup ready, showing that advertising pressure is increasing, but we negotiated better rates, and everything will look better. And those promotions…? What’s this outrageous cost? A contest “win a trip to Alaska”? When did you convinced me to do that? Let’s not waste our money and focus on important things!
“But Flavia, YOU asked me for an idea to push our new fabric softener variant called “Ice Age 2”!
Ehm, really. Well, it’s clear from these numbers that we didn’t sell one bottle more. Was it necessary to give prizes like this? Now let me think how we can justify this…

 

..and so on, for each product and each row of those spreadsheets.
Every number has a story, and tells about successes and failures.
Sometimes I did the rehearsal with my team, to make them feel safer. If they ask you this, say that. If they ask you what’s the expected market share to achieve the plan, do you have the simulation?
The new launch we are working at, do you have the Profit & Loss simulation with launch strategy A, B , C or AC?

 

I am still impressed when I think of the level of detail we were capable of.
When I left the company, I had to accept that in the new workplace there was no such culture, no such precise management of P&L’s, it was just impossible.

And these things reflect in the stock exchange results.

 

Sometimes it’s easy to see a problem when numbers speak to you, when they “cry out the truth”, they tell you that your investment has no return and year after year you are devaluing yourself, and still, in order to change that, you have to climb a mountain.
It may look strange to you, finding such a poetry in numbers, but sometimes even P&L’s can be a precise metaphor of life.

VN:F [1.9.20_1166]
Rating: 8.4/10 (14 votes cast)
When numbers speak volumes to you: The joy of profit and loss spreadsheets, 8.4 out of 10 based on 14 ratings
Be Sociable, Share!

   

Tags: ,

One Response to “When numbers speak volumes to you: The joy of profit and loss spreadsheets”

  1. stefano says:

    Fantastic!! The numbers voice telling the truth…or your truth! :-)

    VA:F [1.9.20_1166]
    Rating: 0.0/5 (0 votes cast)

Leave a Reply

To protect against spam, off-topic and abusive comments, are reviewed before being posted to the blog.