Could Better Information Quality Give Your Business a Competitive Advantage?
Following the banking crisis, business articles and advice have focused on the importance of managing cash flow and monitoring costs. There’s no denying that business managers and owners need reliable and timely information to measure and improve the cash cycle of their business. The industry in which you operate will influence how this information is currently collected and used. Some well established and successful businesses rely on their bank balance and observation of day to day trends to guide their decisions and actions. The nature of other sectors requires a more formal approach – monthly or weekly management accounts.
Many of you may use accounting software to record transactions and run regular reports. If you have invested in software and administrative staff you can be forgiven for being disappointed with the relevance of information at your disposal. One reason for this gap in expectations is the fact that accounting software used by small and medium sized business has changed little over the past 15 years. Today, the packages are more ‘user friendly’ and allow entry of more detailed data. However, it is often a struggle to run useful reports to guide your decisions and actions. In recent years, many businesses have reduced their dependence on Excel because they find it time consuming and prone to error. Businesses using one or more computer systems need to unlock the wealth of information they hold.
Having the following information available on an ongoing basis could help you take corrective action to reduce costs or identify opportunities to increase sales:
Product / Service profitability individually or by group
Customer profitability analysis
Comparison to budgets, previous months or years (e.g. March 2009 Vs March 2010)
Breakeven and margin analysis
Cash flow forecasting
Inventory and asset management
Those of you who recognise limitations in your own system may be thinking of investing in new accounting software or upgrading your existing package. This is a big decision which may involve migrating to a new system. It will take time and possibly training to get your accounting system up to date.
The Good News is – It may be possible to extend the capabilities of your existing software using Business Intelligence (BI). Such business reporting and analysis tools do not require data entry and do not alter your software or original records. BI software takes data from your existing software (accounts /payroll /EPOS /manufacturing etc) and presents reports and charts in the format you require. This enables you to monitor the business in real time (to the extent your systems are kept up to date).
BI can be used to simplify the way you collect and view meaningful information. Thanks to advances in technology, BI is now available to progressive small and medium sized businesses that need to track their performance. Having relevant information will give your business an edge over your competitors in key areas of identifying trends, targeting customers, correctly pricing your offering, managing inventory and monitoring costs. By viewing trends early and reducing the time and resources spent on preparing reports you will be better prepared to adapt to changes in market conditions. Is it worth taking the time to draw up an information wish list? You may be surprised to discover what is possible through optimising your existing systems or using BI tools.