30/07/2012

By Robert Craven, MD at Directors Centre

Imagine the scenario...

You are invited into the airplane cockpit. The pilot is sitting there with his hands on the controls. It is only then that you notice he is wearing a blindfold.

Take Two: Same but different: You are invited into the business owner or managing director’s office. The MD is sitting there with his hands on the computer keyboard. It is only then that you notice he is wearing a blindfold.

I am afraid the reality is that virtually every business owner (all but the absolute minority) is flying blind. They have no idea what the dashboard says. And even if they knew where the dashboard was, they wouldn’t have a clue how to interpret the information. Not only that, but they also have a pretty distorted or fuzzy view of what’s going on around them: the windscreen is all fogged up.

And you wonder why so many businesses crash and burn. You wonder why more businesses don’t do better...

Now, I am no accountant and I am not advocating that we let the accountants take over the business. Quite the reverse.

However, we, the business owners, need to take control. We need to take off the blindfold and we need to learn what the dials in the cockpit mean and which ones we need to pay attention to. And to be honest, like the pilot, we don’t need to pay attention to that many. In effect, we need to know how high we are, how fast we are going, and how much fuel we have got on board.

Now, I know I am simplifying things but most businesses are not on top of these things. They don’t know what to measure and, when they do measure it, the information is usually too late to be of any great value.

If we are serious about running our businesses then we need to get on top of the management information. Decide what you need to measure. Decide how quickly you want to receive the information and in what format. And then you can make decisions as a result of the information, the facts that are in front of you.

At best, too many businesses make decisions on partial information. It is bonkers. And what is so totally infuriating is the fact that 95% of the information is readily accessible. With modern technology it can all be at your fingertips. It is no longer the case that you have to wait till the end of the year before you handover your shoebox(es) of info to your accountant so that you can wait a further 8-12-16 weeks before you get any sense of your profit or cash situation. Never mind any of the other metrics.

So, where does this leave the ‘accountant’?

Speaking in sweeping generalisations I would argue that the accountant is actually in a stronger and more compelling position than ever before. At the same time, the business owner now has easier and better access to more data than ever before. In the ‘old’ world the accountant acted like the policeman guarding your historic info and giving too little information too late.

In this ‘new’ world, the accountant can add tremendous value to your business, helping and showing you how to interpret up-to-date information about your business performance and key decisions. You need to work with an accounting package/process software that works, and an accountant that works for you: a dynamite combination.

It would be like flying a plane with the blindfold taken off. Who wouldn’t want some of that?