You can’t manage it if you can’t measure it. But how do you get your reporting systems to accurately portray what you really need to know?
The true value of a reporting system is how much it tells you about what your business needs to be successful – not just today but into the future.
According to Thomas Thoma, Business Services Principal at Crowe Horwath, this means focusing on what drives the business.
He says the challenge is capturing a range of information, “some of it might be in people’s heads and some in Excel spreadsheets”. That will give business owners an accurate picture of how their business is performing and enable them to respond to changing market conditions.
This is reinforced by Simon Cathro, Lead Partner at Deloitte Black Ink, who says businesses need to ensure that reporting systems can deliver predictive information to forecast cash flow and profitability in coming months.
“It’s vital for businesses to do cash flow forecasts, either using their own software or talking to their professional advisers to see where their cash is sitting, and that they’re generating sufficient cash to be able to maintain a profitable business,” says Cathro.
Meeting the need
So, how can business owners determine if they’re getting the information they need? And how do they create simple, yet robust, reporting systems that best reflect the overall health and performance of their businesses?
Thoma says a good starting point is a monthly management meeting of people in key operational areas with an agenda focused on measuring business performance.
He suggests a scorecard approach with four areas of focus:
A financial report (eg. sales, cash flow, profitability)
The customer perspective (eg. building relationships, marketing efforts)
The process and innovation perspective (eg. delivering customer value, measuring efficiency, new and lost accounts)
The people perspective (workplace effectiveness eg. staff health, safety, morale)
Thoma believes no more than 25 key performance indicators should be measured, to avoid the risk of “KPI paralysis”, where time is wasted trying to gather information that’s irrelevant or hard to measure. He adopts the SMART approach to defining KPIs, making sure they’re specific, measurable, attainable, relevant and trackable.
Technology to the rescue
When it comes to technology, the importance of good accounting software can’t be overlooked.
For those that choose an in-house approach, a wide range of IT systems enables businesses of all sizes to customise their reporting systems. And for those that opt to outsource the work, ‘cloud computing’ is forecast to transform IT and offers a number of benefits. Cloud computing is when a business uses an internet provider to store its data and run its business applications and communications.
Whatever approach you take, there are important factors to consider. Four leading software providers offer their advice:
Tim Reed, CEO, MYOB (accounting, retail and payroll software for SMEs and accounting practices). Says it’s important to buy a system that allows growing businesses to add features such as electronic payment channels or payroll. He says this enables businesses to only pay for what they need and to expand without having to migrate data to a new system.
Gerald Chait, Group General Manager, Marketing, Reckon (Quick Books, Quicken and Reckon accounting software for accountants, bookkeepers, business owners and individuals). Says business owners need to look at how specific functionality in different versions of accounting software meets their needs and also ensure that operational systems (such as Point of Sale systems in retail) integrate with their accounting software. He adds that anyone buying software should investigate the support and training provided, as well as the cost of accessing technical support.
Graham Baillie, Executive Chairman, JCurve Solutions (integrated management and accounting software for small and medium businesses through web-based service). Believes businesses tend to underestimate the time spent on installation and should investigate how easy it is to customise and update software. He says that as businesses get larger, a cloud solution lets them manage multiple locations, by gathering real-time data from their second or third shop.
Wayne Schmidt, Manager, Xero Australia (web-based accounting software system for small business). Says cloud computing not only means businesses don’t have to buy, install and maintain their own software and systems infrastructure, but they can also check data online at any time. He advises buyers to ask about cloud system security and warns to watch out for additional charges from their provider for customising data collection and fees for going over the transaction limit.
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