Business Inside Out by Martin Towers: Accurate information is a precious resource

Or just, in the first instance, understanding the state of play within a prompt and sensible timeframe.

Which may start with producing an accurate set of accounts. This sounds very basic and the blindingly obvious. Yet many an entrepreneur in the early stages regards basic accounting as low priority. Whilst at the other end of the spectrum the multi-national company will produce accounts about 100 pages long that means virtually nothing to anybody.

No commercial explanation, the reader cannot hope to see the wood from the trees. This is evidence of dis-economies of scale and because of its sheer size an unmanageable business.

It has to be horses for courses. The fledgling business needs to know the basics, emphasis upon cash generation or burn. And have a focus on management information. Profitability by business stream or channel, by end market. The best use of management time is in managing by exception so having the key financial information to hand is an essential tool in quality decision-making.

And this means systems, let the ball or the numbers do the work, don’t manage inefficiency by having to carry out as a non routine time consuming task that which the business needs as a matter of routine.

Systems means information technology and this is where some of the problems start. You may have a Chief Information Officer or CIO, most do nowadays as a C-suite executive. But if the business has not invested in IT the information will not be forthcoming and you are at a competitive disadvantage.

Legacy businesses with age-old systems, a veritable patchwork quilt of individual dis-integrated systems, are at a big dis-advantage to younger challenger businesses with modern systems and a management team that invests in and understands the power of IT.

For the legacy business to modernise now would be such a risky, large scale expensive undertaking and virtually impossible to do around day-to-day trading that it is not even attempted.

You are talking re-training the whole workforce. Further evidence of dis-economies of sale, lousy or non-existent customer service, negative goodwill, lost customers. Prepare yourself for managing inefficiency, and frustrated employees who are having to work around the systems until they get fed up and leave.

It’s often back to basics. Focus on what matters and is significant. Decide what the key performance indicators are (KPIs). Forget the noise. Not everybody delights in poring over pages of data. Attention spans are usually short.

Business needs the raw data organised in a sensible and meaningful way, it also needs the data analysis and this is what many businesses lack. WFH has prompted forward-thinking companies to focus their energies and capital spend on IT systems easily accessible from home.

Credible independent accurate and timely information can be a competitive advantage.

Martin Towers is the former finance director of Kelda Group, which was the parent company of Yorkshire Water, and former CEO of Spice PLC. He is now an early-stage business investor.