The Power of Information

A 2012 study by McAfee and Brynjolfsson covering 330 North American public companies found that companies which were in the top third of their industry in the use of data-driven decision-making were, on average 5% more productive and 6% more profitable than their competitors.  This means having access and understanding reliable and relevant information can be the competitive advantage for your business and enable better decision to be made.

I once heard a yet relevant and entertaining analogy comparing a business to an expensive sports car.  In essence the analogy considers that you would never disconnect the gauges, speedometer or warning lights on a car because you would never know that you were heading for trouble until it was too late.  You would also never get this expensive car serviced only once a year if you were driving it every day.  So if in your business the annual financial statements are the only gauge you have on your businesses performance then are you not doing the same thing putting your business at unnecessary risk every day?

All too often a business owner will look at their financial performance once a year.  Typically this will be months after 30 June when the financial statements and income tax returns have been finalised by an accountant.  At this time a business owner will want to know the answer to two questions, did my business make a profit?  And how much tax do I owe the ATO?

If this is really the one time a business owner gets a true picture of their financial performance then what a great opportunity there is to do things differently! Imagine that you were across the financial aspects and performance of the business before making decisions.  Imagine that your accounting system was accurate and reliable each day so at any point in time you could review your profit and performance, not just at year end.

With the right information, comes power.  The “right” information is distinctively different from “any” information.  Quality is more important that quantity – you could report and analyse every aspect of your business but this does not necessarily mean you will have useful information.   You need to focus on areas that are relevant and assist your decision making.

Time and time again I have experienced how the right information is vital for decision making.  This can provide you as a business owner, or a potential business owner, a higher level of certainty and an understanding of opportunities that can be leveraged.  Alternatively, the right information can expose potential risks that need to be mitigated. 

By Felicity Cheeseman @ SALO. Strategic

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