Tell me what the following numbers mean:
I think you’ll agree that you can guess all you like, but it’s near impossible to interpret the meaning of numbers without some context. So, let me give you some.
I was listening to National Radio recently (as you do when you’re getting older). I heard an interview with someone who was employed in 1973 as a traffic officer with the Ministry of Transport. When he started his employment, the road toll was 843, which is an astonishing number. Imagine the level of grief felt around New Zealand every year because of the number of people killed on our roads.
NZ was a small country back then, with a population of some 2.7 million people. If that rate of road toll deaths was allowed to continue, the toll today would be 2500. Imagine that! But it isn’t. Forty-five years later, it’s 380 (the 2017 figure). That’s still too high, but it isn’t 2500.
So, what happened to bring that number down? Since 1973 there have been huge changes that have impacted the annual road toll—cars have become safer, roads have improved, there is better health care, less drink driving, more driver education, better laws governing such things as seat belts … a whole heap of interventions.
But something happened in 1973 to bring these interventions about—the fact is, internationally people said that’s enough. There was a huge groundswell that demanded change.
There are two morals to this story. The first is that unless we know the context of numbers, we can’t understand them. The second is that once we understand the story the numbers are telling us, we can make fundamental changes that will impact the way we do things, for the better. Even though we’ve seen huge changes that have impacted the road toll, it’s fair to say all those changes were incremental. A little change here, a little change there. Let’s make the analogy with our businesses—what incremental changes can we make that will significantly impact the way our businesses are going?
Before we can make those changes we need to know what story our numbers are telling us. In order to change the direction we’re going in, we need to know whether the numbers are reasonable, or if we need to start making changes that will impact where we will be in 5, or 20, or 30 years.
That’s where a good Chartered Accountant comes in. We can help you interpret your numbers well, and help you hear the story they’re telling you. And we can suggest the incremental changes will have the most impact on the future of your business.