How To Teach Management To Review Business Metrics
Tom Stimson
July 15, 2022
A team sitting down at a table using their laptops and having a meeting.

Too often, a month-close meeting looks like a bunch of people peering at a spreadsheet or P&L — and no one knows what to do with it.

We previously covered P&L statements and talked about how to make them actionable. Your cost of goods sold aligns with income; you have columns of percentages, and you’re looking at everything as a percentage of revenue.

So if you generate an actionable P&L according to the principles in that previous post, you should be able to start having productive conversations around actionable metrics. And the month-close meeting is the place to do it.

The P&L shows you where action is needed; the month-close meeting is where that action manifests.

The Makeup of a Month-Close Meeting

Month-close meetings should take place once a month. They don’t necessarily have to be long; sometimes as little as 30 minutes is all that’s needed.

Ideally, your bookkeeper should be able to close the previous month ten days after the month ends. They’ll probably need another week or so to send you the report. This means you should be able to have a month-close meeting by the 20th or so.

(That will come as a shock to some owners looking at month closings that are 60 and 90 days past. But that’s a different problem.)

Who needs to be at the month-close meeting? The managers of all the cost centers of your business.

Finance, sales, operations, and project management are all cost centers. They all own processes and outcomes that affect P&L. HR and your office manager probably need to be there as well.

If you have 10 employees, you might have three to five people in the meeting. If you have 100 employees, the meeting will max out at about 12 or 15 people.

Preparing for the Meeting

At each month’s close, your master spreadsheet should be updated with the latest month’s data. This way you can see not only the current month, but also the same month from the previous year (which can be a helpful reference) and a trailing 12-month average.

Then, before your month-close meeting, circulate the report to the managers who will be attending the meeting. Their job begins here, analyze the month’s report and cite anything that seems off-base. Maybe it’s just a timing issue, coding problem, or entry error, but now is the time to get those questions out of the way, so the meeting isn’t clogged up with nuts and bolts.

P&L statements rarely come out perfectly clean the first time around; there’s always at least one revision. But once the revised P&L is 95% correct, it’s ready for the meeting.

It’s also important for each manager to know their role in the meeting.

They need to know they’re in attendance because each of their teams influences key metrics in the P&L. They should know which metrics their teams influence and be ready to review and comment on them during the meeting.

However, in the interest of productive meetings, they don’t need to comment if there’s nothing to comment on. If their metrics are normal, then they can leave time to focus on anything that does need attention.

The person running the meeting will likely already have three or four key variances pulled for discussion. Other attendees might point out additional items that need to be discussed and add them to the list.

The Purpose of the Meeting

The purpose of the month-close meeting is two-fold: looking back and looking forward.

Infographic: IS - 07/18/22

Looking Back at Anomalies

The purpose of the month-close meeting is to understand the results of the P&L report — and anomalies are a key part of those results.

It’s okay to occasionally talk about how consistent other factors have been, and even to question whether this is a good or bad thing. But anomalies will be the primary points of focus for the meeting.

The management team will discuss the key anomalies in the numbers, make sure everyone understands them, and figure out what (if any) corrective action needs to be taken for each. That way when people leave the meeting, they leave knowing what to do.

Actionable financial reports make it possible for meetings to result in meaningful action — if they need to.

Forecasting P&L

Once you’re finished looking back at anomalies, you need to review your forecast P&L.

Forecast P&Ls look a lot like backward-looking P&Ls, except that they’re generally based on forecasted revenue, which can change from month to month.

A budget forecast looks to the rest of the year or through the next 12 months. If you’ve addressed the anomalies in your backward-looking P&L, you need to take that information and apply it to your forecast.

Sometimes the forecast will change based on recent experiences with the past. This is the meeting’s other purpose: to determine whether you need to make adjustments to the forecast based on what you learned.

How accurate have you been in revenue forecasting? Do you need to adjust some percentages on the cost of goods sold? Are changes in buyer behavior affecting your pricing and, therefore, your margins?

As you gain new information, you can constantly apply it to your forward-looking model, making it increasingly accurate as you go.

Two Examples

1. Cost of Labor

Say you find this anomaly during your month-close meeting: Your cost of labor as a percentage of revenue is climbing at an alarming rate — one you didn’t anticipate.

Everyone realizes that something is happening either on the sale side or the delivery side to reduce labor margins.

When you go over the P&L for the past couple of months, you find a slight trend in this direction that you probably should have caught earlier. It was just so small that you didn’t notice it.

But now it’s getting big, and corrective action is needed.

The next step is some further analysis to find out where the anomaly is coming from. There are any number of reasons labor costs could rise. Are your costs increasing? Are your prices not keeping up with your costs? Are there protocols and disciplines that aren’t being followed properly?

The initial corrective action may be simply to identify the real reason for the increase. Or, if the reason is immediately obvious, you can make a change right away.

Do you need to get better at enforcing your prices? Do you need to raise pricing? Do you need to do a better job of buying? Do you need to listen to buyers about what things actually cost? Do you need to get better at estimating?

Whatever it is, implement that change.

The great thing about reviewing your P&L monthly is that the numbers tell you a story. When they show you an anomaly like this, they’re telling you, “Action needed! Do something!” They help you break negative cycles on a monthly basis so you don’t end up with 12 months of compounded losses.

2. Streaming Studio Revenue

This time when you’re going through your P&L, your team notices that your streaming studio revenue has dropped to almost zero — a definite anomaly.

You begin to investigate the reason why. Why did this number change? Is the drop a good or bad indicator? Is it just a reflection of the buying habits of the customer?

In this case, you find, the anomaly isn’t good OR bad; it’s just information. The information doesn’t reflect a mistake or a need for change, but the pent-up demand for in-person meetings. Customers simply don’t want streaming right now, and there’s nothing you can or should do about it — except remember that streaming may come back again.

In our business, we know that seasonality plays a role. People buy things in droves at one time of year that no one’s buying at another time of year. So instead of abandoning your streaming studio, you decide to keep it ready for when demand increases again.

Besides awareness that demand will probably return, the action item here may be to let your team know not to discourage customers when they start asking for streaming services again.

In the meantime, you can get some extra value out of your studio in other ways. Use it to host demos and client discussions, or for producing marketing videos and promoting solutions.


The result of a good month-close meeting is a management team that knows how to identify and investigate anomalies, asking questions like:

  • Is this a good or bad indicator, or is it just information?
  • Can we explain why it happened? Is the source on our side or the customer side?
  • Can we or should we do anything about it?
  • If so, what?

They also begin to understand how long it takes to turn the ship. It’s not impossible to turn a supertanker, but it takes time. Even if they implement a change the day of your monthly meeting, they may not see that correction manifest on the P&L for 90, or even 120, days.

But they will see it. And all of this clear communication will result in managers who understand exactly how the day-to-day actions of themselves and their teams affect the P&L.

About Tom Stimson
Tom Stimson MBA, CTS is an authority on business and strategy for small- to medium-sized companies. He is an expert on project-based selling and a thought leader for innovative business processes.
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