What does accounting integration mean to small businesses?

Integrating accounts with other business data is probably the most significant step any business can take to provide a platform for growth. This is why…

Any business decision is better if it’s based on real data sourced in real time – and the most efficient way to make that happen is to integrate your accounting package with all other areas of your business.

This is important because it bring together the trinity of business basics: Costs, Sales, and Cash-flow, all of which have financial values attached – so why wouldn’t they be part of your finance system.

Integration of point of sale with stock control is an obvious example. You wouldn’t want to run out of product and lose a sale any more than you’d want a warehouse full of goods soaking up money you need to pay wages or utility bills. It therefore makes sense to raise orders in a way that mirrors the way goods leave the shelves.

But that doesn’t help you to see the bigger picture; to analyse what’s happening as it happens, and to avoid the cash flow problems that can cause a business to stagnate, or even drag it under.

Look at it this way: Imaging profits for the whole company are growing year on year. Wonderful. Sure, the rate of growth has fallen in the last couple of years, but there’s still growth; still a little dividend to be taken, and still funds left over for re-investment. Nothing to worry about, is there?

Well, maybe there is. You’re looking at a ‘global’ view of your business. What if the slowdown in your rate of growth is down to a particular cause. If you have depots nationwide, perhaps one of them is making heavy losses. If you have just one location, perhaps one product area is failing. Either way, the financial position of the whole business is taking a hit.

Check regularly
Looking at the numbers daily or even weekly will enable you to see a problem developing, and give you the opportunity to step in and take action to remedy the situation. The frequency can be dictated by the kind of business you’re in. Once you’ve seen a problem, the fix might be a small one, or it might be more complicated. That doesn’t matter; what matters is that by integrating your accounting with other areas of the business you’re able to see a more accurate picture of the reality of your business, rather than one based on a ‘finger in the wind’ assessment, which is always likely to be inaccurate.

Measure performance
Put effort into checking the margin you’re achieving on all your lines. Identify the weakest performers, those with small margins a low volume sales. Look for ways to increase sales volume or margin, and if neither is possible, consider removing them from the portfolio. You don’t have to do that, but if you don’t you need to have a business-based reason to justify keeping them.

Immerse yourself in the data
Pause and think about the data you gather about your business. Are you getting it fast enough? Are you analysing it thoroughly enough, and reacting to what it’s telling you?

And above all, are you controlling cash flow? The danger area here is in your overheads, and failure to manage these has led to the downfall of some major household names. Here you need to do some comparisons with external factors, like inflation. Figures are easy enough to get from the internet.

And finally…
The simple thought is that, for better or worse, things are happening in your business. You need to know what they are. The numbers will tell you, so work with your teams to identify if you’re getting the right numbers quickly enough, and acting upon the story that’s being told. That way you’re more likely to spot opportunities, and less likely to run into a disaster.