When I give workshops on pricing custom woodwork, I often make a joke about small shops that operate on what I call a “checkbook P&L.” In other words, they look at their checkbook balance at the end of the month, and if it’s not overdrawn, they figure they made a profit.

But it’s really no joke. You need to measure your progress to ensure profitability. 

At least the guy with the checkbook is looking, even if he doesn’t have a complete profit and loss statement to go by.

In today’s increasingly complex world of manufacturing, I’m not sure it’s really possible to effectively manage a business without computers and software. 

Even something as basic as an Excel or Google spreadsheet can be transformative if it points to a better way of doing something or highlights a place that was leaking away profits.

But even spreadsheets have limitations, especially if multiple spreadsheets are looking at interrelated processes and departments. 
The modern solution is Enterprise Resource Planning software or ERP for short.

Still, that’s a level of sophistication that seems daunting for many smaller operators. 

They wonder if the benefits will outweigh the costs in not just money, but also in the time invested to learn the software system, develop the data, and train the workforce to use it.

From what I have seen, there are benefits even for smaller operations. It gives them a dashboard to better see what’s going on in their business in real time. 

For companies that have embraced the open-books philosophy with their employees, it’s a huge aid in getting the whole team on board with moving the company forward. 

That really helps management grow the company, so you might say they grow into the software, too.
To me, the larger issue points back to that old saying, “You manage what you measure.” 

It’s awfully hard to know what really needs changing without measurable data. And it’s even harder to know if your changes are working the way you want them to without data to back it up. That’s what more sophisticated reporting systems can do for you.
The days of managing by the seat of your pants, hunches, and instinct are long gone. 

Oh, I’m sure there are still managers and even CEOs who manage that way, then look for numbers to back up their preconceived notions. But it’s a lot better to already have the numbers in hand and let them point the way to a better direction in your business.
That old checkbook P&L could only tell you up or down. It couldn’t really point the way forward.