Reporting Plans for SMEs - The End of the Tunnel

The success of any business depends directly on the quality of decisions by its directors, which can be handicapped by lack of good, dependable and timely information. Small and Medium businesses are vulnerable to business failures with their limited resources to monitor business performance, resulting in delays to convert opportunities. In most cases, the perception that periodic reporting is expensive and a time consuming activity leads to inadequate reporting. There are many creative ways of producing management reports, which are automated, delivered on time with enough checks and balances built in.

The Challenge for SMEs

SMEs are more prone to failures due to external changes than larger entities. Loss of a major order, cash flow problems and market fluctuations can cause enormous damage and a limited capacity to recover can lead them to collapse. With no timely and insightful management reports, decision makers are oblivious and ill equipped to take remedial measures and most times, its only at the end of the accounting year that issues show up which could have been controlled and managed earlier. The agility and flexibility of a small organization is lost as a result of the delay in getting accurate data, leading to delays in strategic decision making like acquiring a new customer, entering a new business vertical or a new marketing plan. SME organizations have to invest into business information systems and improve management reporting to succeed.

The Need for Reporting

Most executives realize the need for a business plan for their organization but in reality very few have one. A sound business plan is an indicator of success in this competitive and changing environment. The business needs to clearly define their goals and have reliable methods to measure performance in the short term and long term. Business leaders have to devise Key Performance Indicators like net profit, productivity and customer value, the indicators for organizational performance and success. They also need to monitor them regularly to gain insights into their business and the external environment to prevent surprises.

Reporting Problems

The biggest constraint to good reporting is the disparity of formats between business plans and financial software. Spreadsheets are the most preferred and widely used application for business reporting across the SME industry but the gap in integration between accounting systems and spreadsheets defeat the efforts to build a robust reporting structure. Although most accounting systems provide standard and customized reports, they are not extensive enough to compare previous data or show trends. This leads to manual scrambling from multiple sources to collect data and create a KPI report with the required measures. Manual interventions, with chances of error, reduce the credibility of the reports and finds disfavor with the management.

Working with what you have

Even with all its advantages, spreadsheets have limitations of storing and manipulating data. An excel sheet can only store 65,000 records and any workbook with even one tenth of those numbers drags in performance during calculations. The business value for smaller organizations is to achieve a balance, by maximizing the potential of spreadsheets and hold back from investing in expensive financial reporting software. In the past few years, accounting software have upgraded their technology to export reports in spreadsheet format but still, not enough to be directly plugged into business plans. Even at this level, manual intervention by collecting data from these exports to update KPI reports cannot be eliminated completely. On the other hand, though linking in excel can help to an extent to automate tasks but can lead to inconsistencies when fields, data terms and other elements change. The solution is to increase automation and build alert mechanisms so that quick, reliable and sound indicators of business performance can be reported. Technologies like Object Linking and Embedding (OLE) are the solution to connecting excel to accounting packages. It is possible with OLE's to link each cell of excel to collect data from another system. This one way link can be extended to collect data for all the fields in excel, and by creating reporting dashboards which can showcase all the Key Performance Indicators, the whole report can be updated timely, overcoming traditional reporting problems. A two way link by connecting excel back to the accounting system by using "Return" function will help updating the accounting system from excel. This could lead to issues if not implemented with care as updating data through excel could lead to data integrity issues in the accounting software. The use of OLE can help SME's build a strong platform of reporting, providing insights into business, access to KPI level information, which in turn helps higher level decision making and boost management confidence.

Managing Reporting

Once the basic reporting foundation is in place, SMEs can plan to build control mechanism into it. Traditionally, reporting was looked upon as a tool to highlight specific problems like pending payments, excess inventory and vendor deliveries. Such overflow is detrimental to business and it is often too late to reverse such events if not captured timely. A proactive alert mechanism which can be connected to Performance Indicators can track events and automate response. A customer payment pending for more than seven days can be followed up automatically by the software by sending a reminder. Thresholds can be defined for KPIs like customer's credit limit, pending invoices and email responses and the ones going beyond can be alerted to help quick action. SME's can survive the competitive environment and live up to the demands if they proactively build business plans, indicators of business performance and constantly track them. Though investment, time and resources are limited, the available tools like Excel can be smartly used with various other information systems. A core management reporting system with efficient alerting mechanism will help achieve a comprehensive platform for business reporting and insights for decision makers. In the past SME's have struggled to attain this information but now technologies like OLE, email alerts and SMS alerts enable the essential monitoring of KPIs that are important to retain business control and growth.