bookchadmin

Brexit – the importance of sound Management Information

However you voted and whatever your view of the future, one thing is clear – prompt and sound quality MI has never been more important, yet the majority of UK businesses are missing a trick as they don’t have it. The norm is to fly by the seat of the pants, with information limited to sales, order book and bank balance and not always all three.

But what about profitability? The usual missing gap is profit & loss reporting, crucially by sectors of the business. For instance our company is two quite separate services: book-keeping with management accounts; payroll with auto enrolment. They are different in many ways, particularly in their profit margins. Mix them up and the picture is cloudy – which is causing the improvement or deterioration? The only way to know and be in a position to action the right area is to split the reporting. Do you?

Before you spring into action, just check that you’ve covered an important word above – quality. There’s no point in expending energy, time and cost to produce unsound information. That’s worse than useless, it’s potential misleading and possibly even dangerous. It’s all or nothing - either it's fit for purpose or don’t bother.

Yet achieving fit for purpose is not difficult, it’s simply a matter of finding the right skills. And if you don’t have them then outsourcing is the answer, simple really.

If we may use this word then make sure that you are in “control” of your business. Your MI will therefore need to include regular forecasts.  During transition it will be worth looking out for assistance as we head into uncharted waters. This will of course apply especially to exchange rates which are bound to be volatile for some time.  

Brexit has brought a lot of uncertainty but also opportunities. You can remove a critical part of your own uncertainty by producing top quality MI – this will be the biggest step you can take to improving your profitability whatever Brexit produces.

 

Black & White. You’ve either got it or you haven’t - quality Management Information

Quality Management Information

The business world is divided into the haves and have nots - which one are you? Some have nots want it and others don't - fair enough, as there's no point in complicating matters if the information is not going to be used to increase profitability or value.

What's interesting, at least from our perspective, are the businesses that don't know whether MI would be of benefit because they don't have the experience. So here are a few thoughts to help this group.

Let's start with the very well worn cliché which never dates and bears repeating “ Sales is Vanity, Profit is Sanity and Cash is King". In a nutshell that is arguably the best business advice ever. The second best might be "If you can Measure it you can Improve it".

Let's look at measuring profit. What's needed is something like your year end accounts but much better in that they should be monthly, to allow prompt attention and they must be totally understandable to you, the owner and user. If not, it's going to be wasted effort. You will need to understand and focus on Margins as that is a key indicator of your profitability.

Beyond that, always look for a split of the business, such as sales of product separate from a repairing service. If you don't separate the gross margins for each then you're mixing and messing the information. Simple but crucial.

That's all, short and sweet. If that's whetted your appetite then do something about it and enjoy the extra profits.

Anthony Pilkington

Managing Director, BookCheck Ltd

This entry was posted in Management Accounts and tagged in Management Accounts by bookchadmin