Our guest post author is Steph Hinds, our Super VCFO and Xero Accounting Partner of the Year, 2012. Steph owns Growthwise, a best-in-breed advisory firm based in Newcastle, Australia.
We have so much data in our lives now. As business owners how do we determine what to monitor and react to? What really tells us how our business is going and where we need to improve?
There is a lot of hype and talk in the accounting and small business industry about ‘real time data’ and dashboards - but are they really all that useful? And if they are, what data is actually useful?
It’s time we got real about ‘real time’.
Dashboard Data Must be Accurate
Most people will have heard the saying “garbage in = garbage out”. That’s why we think data quality is mission critical. After all, if your accounting data is not 100% accurate, complete and up-to-date, then ‘real time’ dashboards produced will be inaccurate. ‘Garbage out’ in this instance could actually be telling you one thing when reality is another - dangerous for the advisor and the business owner!
Timing Is Everything
We are big advocates at Growthwise of #banadmin. For small business owners admin distractions are horrid. They take precious time away from working on the next sale, the strategy to grow the business or simply doing the work.
In Australia, we have oodles of red tape so admin for most businesses (certainly the growing ones) tends to be a big interference. Timing when and how you maintain your accounting data is important; after all, having every invoice payable entered into Xero (as an example) the minute you receive the invoice is just plain stupid. Reconciling everything everyday for most people means they are picking up and putting down a job that could be done once a week or fortnight in a fraction of the time.
Smart businesses have streamlined internal processes, but also know that time is precious and the timing of accounting and reporting is all-important. ‘Real-time’ data that is 100% up-to-date or complete is just not a realistic proposition for most businesses focussed on the customer, growth and success.
But would having this information accurate and ‘real time’ 100% of the time make a difference? My answer to that is it depends on what you are monitoring. Would knowing your Current Ratio everyday really make a difference in your business? What would you do with this number?
In most cases, key business metrics are simply best viewed on a regular, periodic basis, combining a mix of performance outcomes and future-focussed analysis. This is what we successfully provide to dozens of our clients at Growthwise with Spotlight Dashboard.
Real Time Use Case
Let's look at an example where having Real-Time makes sense - and where the most useful ‘ready reaction’ real-time data resides.
You are a retail business. You got some great advice when you set up so have implemented Vend as your Point-of-Sale System, Deputy as your Rostering System and Xero as the accounting add-on. What's important for you to know on a daily basis in your business? What about weekly?
As a retailer you will want to monitor your Daily Sales. You will want to compare those sales to previous weeks’ results. A great retailer will have a daily budget set as well. You might be monitoring the basket size, or basket value, discounts being offered. You could be comparing sales by salesperson. Or Gross Profit per day, per supplier, per product category. Wages percentage to sales per day or week would also be helpful. The good thing about these numbers is taking ACTION to improve them on a daily or weekly basis can have a HUGE impact on your business.
None of the above information comes from your accounting system Xero. It comes from the awesome reports already inside Vend and Deputy, which are great for tactical responsiveness. It's ‘real time’ in these systems (assuming the right information is entered) and it's in front of you during and at the end of the day.
From Tactics to Strategy
It's really important, therefore, to be able to distinguish between what information you need in real time (and what functional systems already provide such timely and granular detail), and what's important to be monitoring on a monthly basis for strategic decision-making. For most businesses understanding overall profitability, cashflow forecasts, current ratios etc are still really valuable, just not on a ‘real time’ basis from potentially unreconciled and uncurated data.
The accuracy and completeness needed for these reports is far more important than having data served up daily. Being able to combine the financial and non-financial data at the end of the month for strategic decision-making is what makes Spotlight so powerful, and why their products alongside other great add-ons such as Vend and Deputy is the perfect mix for us.