Advivo Business Advisors and Accountants share some of the key advantages and disadvantages of adopting Business intelligence (BI).
Business Intelligence (BI) is an infrastructure of technology that provides business owners with the knowledge to make decisions that are driven by real data, rather than being forced to decide based on “gut instinct”. At Advivo we like to call it “Real-time Reporting”.
All too often, we find that when we ask a business owner how their business is performing in different areas, they will normally have an answer that is based on gut instinct and when we look at systems to measure that performance, we find that we either validate their gut instinct or challenge the business owner’s view. When that view is challenged, it creates the opportunity to improve the business and sharpen the owner’s gut instinct, or we find that there are systemic issues with the reporting systems that is in place that need to be fixed. For example, staff reporting to the owner may need more training, or the technology being used for report is not set up correctly. Either way, this process can improve how this information is received and used in the future. The marketplace and options for Business Intelligence resources is rapidly moving forward and can deliver greater efficiencies and insights into your business and how it is performing. Many industry groups and other sources, including Advivo, can help you in identifying options to improve your current level of effectiveness in this regard.
So, if BI is so good, why isn’t everyone using it, or using it more than they already are? Well like most good things, they come at a price. Some advantages and disadvantages are listed below.
1. Organisations are more likely to buy-in to your business
Accurate reporting means it is much easier to get buy-in from others, especially organisations such as banks, investors, or potential buyers of your business. Accurate data shows investors how your business is financially performing and if they can trust your business to perform well in the future.
2. Helps you identify problems
Business Intelligence can help you identify problems in your processes and can show you how to streamline them. If you don’t know there’s a problem, you can’t fix it, and if you aren’t measuring the process, you won’t know whether you’ve actually fixed it or not.
3. No more “gut instinct”
Not having to rely on your gut for every decision means you can make informed business decisions with confidence. This level of clarity is a massive relief because decisions that can be made based on accurate information rather than assumptions are more likely to be successful.
1. Data integrity
As we already discussed, data accuracy is important. So if the data is not accurate, or transactions are allocated to the wrong area, then the BI may misrepresent the true position of your business.
For example, for financial data, if the bank account is not fully reconciled (or last reconciled to a particular date), then the BI will be incorrect.
There should be exceptional reporting in place that allows the business owner to understand where there may be integrity issues. If the integrity of the data is not very high, then the BI reporting will usually not be accurate enough to rely on.
If the right drivers are not being reported on, then the BI may be irrelevant or misleading. Finding ways to accurately measure key drivers in a time and the cost-affordable way is one of the greatest challenges of creating good BI systems.
2. Setting it up is costly and difficult.
Unless you know what you are doing, setting up BI can often be costly and difficult. It’s better to invest and call in the professionals to set up these systems correctly, so you don’t have any errors that can cost you more in the long run.
One example of BI that we have established at Advivo, is our Monthly Service Programs (MSPs). Clients who are utilising our MSPs know that they will receive a report each month on the financial performance of their business for the prior month, with an executive summary of key points. Our clients know that their accountant has reviewed their businesses’ accounting data and will have the opportunity to discuss with their accountant the contents of that report each month. This provides peace of mind to business owners that there is integrity to their accounting records and a backstop/quality control to their bookkeeping function. These business owners don’t need to be relying on 12+ month-old financial reports, their current bank balance, or their gut instinct, to make decisions about their business.
Not sure where to start your journey with Business Intellegence? Please contact our team of highly skilled advisors and accountants today