MPM Consulting - Accountants and Business Advisers

Could better quality information give your business a competitive advantage? Part 1

In our personal and business lives, there's no shortage of data in paper and electronic format. People often say they have 'too much information'. The truth is - it can be difficult to access the right information at the right time. In business, much time is spent gathering and processing data. The real difficulty is distilling relevant information required to manage our business.

Quality information is accurate, reliable, timely and useful. This is a valuable asset because if used properly it can be used to make informed decisions to grow our business or reduce costs. That's why the quality of information supplied to business owners and managers is vital. The timeliness, accuracy and format of the information have a huge impact on how we make decisions and fulfil our responsibilities.

Traditionally, managers received printed reports. Today, advances in technology give admin or accounts functions more flexible means of communicating with management. Although some managers prefer printed reports there are many benefits to using web based reporting tools such as dashboards and scorecards. They present key information at a glance. These tools are no longer restricted to large companies. Increasing numbers of medium sized companies are creating their own management packs to provide the following information:

Financial and non financial measurements to understand performance
Variance analysis - comparison to budgets, forecasts, competitors
Business processes - best practice and compliance with regulations
Risk identification and mitigation
Resource allocation and management
Forecasting
Departmental systems e.g. Create a HR information system by tapping into your payroll data.

Business managers can greatly benefit from establishing a management information system that best suits their needs. We should first consider:

The information required
The timing and availability of this information
The format information is presented

For information to be useful it must possess the characteristics listed below. In reality there are costs and benefits to improving or favouring individual attributes. A balance needs to be struck e.g. the reliability and accuracy of the information will improve if it is delayed, however its usefulness may be reduced.

Relevant - Too much information can be overwhelming. It's better to have summary information with the option of viewing the supporting details if required.

Concise - Managers need an overview of business performance and position. Bringing summary information from a number of software applications together on one screen or report helps managers to monitor the entire business.

Complete - The information must be adequate to meet the purpose it is intended to serve. Managers need a mixture of financial and operational information to meet their responsibilities.

Timely - Information should be available on a regular basis to allow corrective action or to highlight opportunities. In addition to planned regular reports, management will benefit from ongoing information e.g. automate the collection of bank balances and raw material prices from the web.

Accurate - The information should within reason give a true picture of the business and its targets.

Consistent - The methods to produce the financial results in particular need to be the same as previous periods if any useful comparisons can be made. Changes to policies and assumptions should be disclosed.

Appropriate Format - Information should be presented in a manner that is unbiased and aids understanding. For this reason, charts and other graphics are a powerful way to show results. Dashboards, gauges and scorecards clearly highlight areas that require attention.

Summary

The information requirements of progressive businesses continue to evolve. There are advantages to formal structured reporting and a means of communicating information and trends. Today, advances in technology and cost cutting initiatives demand an efficient means of gathering and transferring knowledge. To be of greatest value, information must be appropriate, relevant, concise, timely and in a format that aids understanding and action.

An efficient information system enables managers to monitor performance, measure the achievement of business objectives and take necessary action.

How do you know if your information system is in need of improvement? Take a moment to answer the following questions.

Do I Want....

to reduce paperwork?

a clearer picture of my business performance on an ongoing basis?

alerts to potential opportunities or difficulties?

to reduce the amount of time it takes to prepare accounts and reports?

a reporting pack that's tailored to me and my business?

remote access to business information?

to automate reports and simplify "ad hoc" reporting?