The importance of good business reporting
- March 2, 2020
- Posted by: Arron Skillen
- Category: Small Business
I started Bizee Management Solutions because I love doing management reporting and I have so much fun being able to work with business owners on a strategy to improve operations, based upon actual data. But in my observations, this isn’t done very well or at all in small business. Additionally, small business owners may not know what they are missing out on, or believe that it is a ‘nice to have’ instead of a need to have. This couldn’t be further from the truth; so to help understand the importance of it, I am going to use an aviation example.
In aviation, a new pilot undertakes many hours of training in order to be qualified to fly safely in our airspace. One of the qualifications that a pilot must obtain is instrumentation. The instrumentation qualification is designed so that they must be able to fly the plane, only looking at the instruments in the cockpit. They can’t look out the windows; they can’t ask their instructor; they must listen to the strict instructions given by Air Traffic Control. They basically fly ‘blind’. Why is this important? In inclement weather, a pilot can rely on the instruments to safely land and navigate through storms when visibility is low. It is a really intense and challenging time for a pilot, because being able to look out the windows not only gives you greater visibility on the situation, but backs up what you are seeing on your gauges.
So what does this have to do with business reporting you ask? In my observations, the majority of businesses in Australia not only do not have functioning gauges (monthly business management reports), they are also flying blind and can’t see out of the windows. They have taken off (started their business) with a destination in mind, but then the weather (the daily business grind) takes over and they can’t rely on their gauges, they react by instinct. This is where small businesses can get into trouble. It is so important to understand that there will be times where you can’t see out of your windows at the bigger picture, so you need to be able to rely on your gauges (business reporting) to safely navigate your way through the storm.
Where should I start?
Good business reporting starts with good bookkeeping practices. If you are still stuck in doing your tax 6-9 months after the end of the financial year, or don’t exactly know what your profit was until your accountant looks at it, you don’t have good bookkeeping practices. This is the essential element that will dictate how accurate your ‘gauges’ are. Accounting programs such as Xero, MYOB Essentials and the like have daily bank feeds which help with reconciling and keeping your file up to date and current. Furthermore, they give management consultants the ability to feed information in to give you great reporting.
The next step is to understand what gauges (parts of your business) that you want to report on. This could be the common areas such as sales, profitability, expenditure, and various other financial metrics, but could also include client retention, churn rates, staff productivity, etc. The possibilities are endless, and the key is finding information that is important to you and your business, not a generic metric. If you can capture data, you can report on it.
Finally, you then need to find an advisor/management consultant that can not only report on your situation as it happens, but one that can help you understand what the ‘gauges’ are saying. Think of them as an instructor that you can talk to. Some businesses like to think they can do this internally, but this is fraught with danger as all staff tend to look at information with ‘rose coloured glasses’ – they may try to see optimistic trends that aren’t actually there. This is why an independent viewpoint is so much more valuable. The information that is contained in these reports, combined with an independent business expert viewpoint will allow you to make better business decisions and effectively navigate around the storm.
We can help
Fortunately, we can help and provide not only the reports, but an independent view point. Check out our services page for more information on how we can help.