Simple accounting, big data and the bottom-line
By Lyall O’Carroll of Seidor, Business Development for KZN
Accounting for change
One of the first and most critical steps in any new business’s development is the adoption of a simple accounting system. Not only does this allow you to understand where the potential financial risk lies in the business, but it also helps to ensure required financial compliance and verifiable adherence to applicable regulations.
Such an accounting system, once implemented, serves as both a tool for measuring and managing money as well as to ensure accountability in all fiscal activities. Of course, this makes sense and has been the sensible way for any business to operate, no matter your industry or offering.
However, today it’s no longer business as usual. The role of the accounting department is not just checks and balances. It has extended further and further into the operational and decision-making aspects of the business, says Lyall O’Carroll of Seidor, Business Development for KZN.
Big data = big changes
Driven by technology and innovation, businesses now have access to almost inexhaustible sources of organic information, mostly generated within their own organisations. Big data provides potentially invaluable information produced and accumulated at a dizzying pace within an organisation and, unless it is quarried for value, will just sit there. Unused and devoid of value.
It comes down to having the right tools for the job. From an accounting perspective, if all you’re doing is managing money in your business, then a simple accounting package makes sense. However, once your business gets to the point where you have a good grasp on the finances but now spend increasingly more time managing the general operations of your organisation, it is time for an upgrade.
An enterprise resource planning (ERP) system is a fit for purpose tool able to optimally manage the increasing complexity of your business through instilling best practice principles that reduce overall risk and the cost of doing business.
In the context of big data, the key value-add to using an ERP is the ability to analyse, and strategically use, the vast amounts of data collected in every business interaction.
When organised correctly, this information can be used to understand trends in the business, analyse customer and supplier relationships (especially with the aim of securing the bottom-line) and are just some of the direct consequences of harnessing the value of big data through an integrated business management system.
It can also help to strengthen the gross profit or margin and increase the company’s brand by value in the market.
The same but different
Unlocking the potential value offered by big data requires a different approach to that followed by accounting solutions. Essentially, these solutions are designed for companies requiring both governance and flexibility.
In a smaller business, this flexibility is an asset due to it usually having fewer resources and less sophisticated internal skills. The smaller business would rather invest in creating market-share, increasing profitability and growing before hiring people to manage processes. However, as a company grows, this flexibility will become a liability since the company will need to look at ways of closing loopholes and identifying areas where governance is not attained.
In addition, as smaller companies grow, their ability to have a finger on the pulse of what’s happening in the market will also diminish, as fewer people are involved in the sales and procurement processes. Communication is also likely to take a knock and information that previously flowed freely throughout the business may not be passed on as readily anymore. Once this tipping point has been reached, the advantages that come with agility and flexibility have run its course and your bottom-line will be directly impacted.
Foundations for the future
Simple accounting systems are therefore not only essential to the early life and longevity of a business. It also provides necessary learnings, forcing the adoption of many of the initial strategies and processes that will later form the foundation for new business systems.
The evolution of a good and solid young company into a named player, and possibly even disruptor in its market is at once unique and similar for most businesses. While a simple accounting package provided the early support needed for a business to get going, an ERP demystifies the inner workings of the business for each user. This turns everyone into a stakeholder in the overall success of the business and allows everyone to perform their tasks more efficiently and to a higher standard. And what business owner doesn’t want that?