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The value of financial information

We have all heard the expression ‘what gets measured gets managed’, meaning that it is difficult to manage something (such as the performance of your business) without having some measurement of how it is performing – for example, sales volumes compared to the same period last year.

There are many indicators that are important to the development and success of a business, the most obvious of which are financial. To use another well-worn phrase, turnover is vanity but profit is sanity so it is important – particularly for small business owners – to understand that activity alone does not equal progress and that being busy all of the time is of no use if that effort is directed to the wrong places.

Where’s the money?

One of the best ways to determine whether you are heading in the right direction is to look at your financial performance indicators. Some of these will be common across many different types of enterprise, such as sales, profits or cash flow, but there will be some that are specific to your business due to the way your industry measures success. For instance, a multi-site retail business might look at same-store sales figures.

These figures will tell you whether the actions you have taken over a certain time period have had the desired results and can be used to make more informed decisions  in the future.

Time is of the essence here. Cash flow needs to be monitored on a weekly basis – if a problem arises the end of the month might be too late.

Everything in moderation

One of the major advantages of using a comprehensive accounts package is that the data it generates can be used to produce more accurate business updates and forecasts than an Excel spreadsheet. Accounting systems can also measure profit or margin in an informative way – for example, by allowing a business to calculate how its turnover would be impacted if customer churn was reduced by 5%. Current data can also be compared with past forecasts.

It is important to set limits on this type of analysis though. Once you have a good grasp of revenue/turnover and the amount of cash available you should have enough to go on. Don’t fall into the trap of ‘analysis paralysis’ where you spend so much time thinking about the data that you become unable to make decisions.

The bigger picture

It is possible to place too much focus on numbers rather than what they tell you about your business’s performance. Successful management involves interpreting the story behind the figures and taking appropriate action. After all, if you don’t know what success looks like, how do you know if you are on track to achieve it?

But figures are still important – what gets measured gets managed is a widely used phrase for a reason. A cloud-based accounting solution such as Big Red Cloud will give you access to the financial information you need to manage your business successfully not just today but next week, next month and next year.

Marc O'Dwyer

After completing a Graduate program in Marketing, Marc’s impressive sales career began at Allied Irish Banks, Pitney Bowes and Panasonic where he received numerous Irish and European sales performance awards and consistently exceeded targets and expectations. In 1992, Marc’s entrepreneurial spirit led him to set up his own business, Irish International Sales (IIS). Initially, this company was a reseller for Take 5 Accounts and Payroll software. Within four years, IIS became the largest reseller of Take 5 in Ireland, acquiring four other Take 5 resellers. He also found time to set up two mobile phone shops under the Cellular World brand and a web design company offering website design services for small businesses. In 2001, he bought the majority share in a small Irish software business, Big Red Book. At that time, the company was losing money. The company became profitable within two months, and Marc then acquired a payroll company to compliment Big Red Books Accounting products. In 2003, IIS were appointed as Channel Partners with SAP for their new SME product, SAP Business One. Marc sold his Take 5 business and concentrated on developing this new market for SAP As a result, by 2007, IIS was recognised as the largest Channel Partner for SAP in EMEA (Europe Middle East and Africa). In 2008, the IIS Sales Manager bought the Company from Marc in an MBO. He launched Big red cloud in June 2012, the online version of big red book, to date the company successfully converts 59% of trials into sales and the number of customers is growing rapidly. Marc continues to run both Big Red Book and Big Red Cloud which now support 75,000 businesses. He is a very keen sportsman, having played rugby for 20 years, represented Leinster at under 16 and under 20 levels, and league squash with Fitzwilliam Lawn Tennis Club for 10 years. Marc has competed in 11 Marathons, including the London and Boston Marathons, and has completed several Triathlons and Half Ironman races. He has also completed six Ironman Races in Austria(x2), Frankfurt (Germany), Nice (France) , Mallorca (Spain) and Copenhagen (Denmark)

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