SME Blog

Small Business IT

Cisco Systems has just produced a report on the buying habits of UK small businesses.  The report surveyed 400 UK small businesses.

It's major findings were:

1.  The majority of small businesses (42%) feel left in the lurch after purchasing technology, due to insufficient post-sales support or training

2.  41% of the respondents felt that enterprise scale technology was imposed on them, as opposed to products tailored to their size

This can be put more simply as they didn't get the product they really wanted and the after sales support was poor.  It's pretty grim findings given the size of the percentages. 

The problem is that the risk on a normal IT spend is with the customer and not the supplier.  The customer often has large up front capital cost.  For a small business this is bad news.  Budgets are tight and once the capital cost has been incurred then there becomes a point of no turning back.  If you have a good service provider and choosen your product well then it's not a problem, but the findings show that this is not the case for a sizeable proportion of small businesses.

Fortunately, we have now seen the emergence of software as a service (or SaaS for short).  The software is rented monthly with no up front capital costs.  It's helpful for cashflow and if you don't like the software, you just stop renting it.  Good examples of SaaS can be found with online accounting and CRM's. 

My favourite example of SaaS is Twinfield online accounting.  It's great software and it is especially ideal for the small business.

Philip Woodgate

Conference Calls

Recently I had first hand experience of yet another example of technology working for us rather than against.  Normally, my conference calls seem to revolve around using the speaker on the phone.  We all huddle around the phone on our side talking loudly into the phone.  The sound quality coming back is reminiscent of an old gramophone from the 1920's (without the fun). 

The conference call I recently had was with four different people in different offices and countries.  We all got an email invitation with a telephone number and pin code.  At the appointed time you dial the number and enter the pin code.  You are then put through to the conference call and can listen to any of the party speak.  It's easy and the sound quality is crystal clear. 

Philip Woodgate

The Next Step

There comes a point that if a new SME is to grow it requires new ways of operating and thinking.  This can be a defining moment for the SME and it will determine whether it will grow into something larger or remain a smaller, perhaps specialist business.

To help deal with the issues faced I have given an example of a common question I get asked and my response.

I am currently running a small engineering company, turnover is currently ½ million but pleased to say that it's increasing rapidly now.  What are the problems that you expect we will encounter and how should I deal with them?

Accounting

I am sure you have previously been in day to day control, probably personally have been involved in the banking, invoicing etc .  This means that you know how the company is performing without relying on a formal accounts system.

As the company grows these tasks will be naturally delegated and you as the owner of the business will find yourself becoming detached from the everyday detail  - this can be a danger point for losing control.

It is vital that a proper management accounting information system is set up now, with the potential for growth so that key information can be available to you without the need for you ploughing through the detail.  You probably need to consider upgrading your accounting system.

People

This leads on to the other major area, which are senior employees.  You are probably at the moment either doing the accounting yourself or have a bookkeeper.  To be able to develop the management accounting system should consider collaborating with your firm of accountants using the new breed of online accounting systems or employing an in-house accountant or .

This will also be the case with other key areas of your business.  Of course you can’t employ managers in all areas at once!  It is as important to choose who you need as choosing the exact person.  This becomes an area of self-analysis  - you need to identify not merely what you like or dislike doing, but what are your skills that are key to the business.  If you are currently running the production and also doing the marketing but you know that the reason for past growth has been your marketing effort then that is the area you need to concentrate on, so your first senior employee will need to be on the production side.

Choosing these people is a danger area.  Do not fall into the trap of promoting someone internally merely because they are there an you would like to keep them – the important aspect is have they the skill set you need! Other traps are employing relatives and friends merely because they need the job – this will at the best be an overhead burden and can be disastrous!

Cash

The orders are flooding in, turnover is up, your accounts show that you are trading profitably – what can go wrong? The problem area is cash or more specifically the lack of cash!  This is technically called overtrading and can become a major problem.

Firstly planning in advance should stop this being a surprise.  If cash flows and budget projections are done as a management information tool (rather than a mere exercise for the bank) then the cash requirements of the increased turnover should be clearly identified.  This is the stage in growth where the use of invoice discounting could be useful.  This used to be thought of as a lender of last resort but now that we are in a lower interest regime it should be considered earlier rather than later – it is always easier to negotiate from a position of strength.

Conclusion

The key to successfully managing this stage of growth is to step back from the day to day and plan. To grow as a business requires new ways of operating and thinking.

Jane Bates

Jane Bates

Jane Bates is a Chartered Accountant and Partner of Goodman Jones LLP.

She prides herself in understanding the needs of the business whatever it's size.  She currently povides audit and assurance and business advisory services to SME's and larger businesses.

Jane's particular sector specialism is property and construction companies.

She can be contacted on:

jane.bates@goodmanjones.com

Podcast

Whilst I'm on accounting online I should also put a link to the Podcast put together by Dennis Howlett.  Dennis made sure the process was very quick and painless for us.  He's the type of person you could talk to all day without a break and never be bored.

Philip Woodgate

Accountants move online

You can read about Online Accounting in the technology section of Financial Director.  Kevin Reed was kind enough to mention my recent work with Twinfield.   I was impressed with how Kevin was able to understand the benefits to business rather than just looking at the IT technology aspects.  As David Terrar would say "think business, not technology."

Philip Woodgate

KPI's Part 2

What are KPI’s. Let’s forget SME’s for a moment and concentrate on sport.  Tennis has them (number of Aces), football has them (shots on target), motor sport has them (fastest lap) as does athletics (distance jumped).  They all provide additional information to help understand the sport.  If you are a football commentator you may be interested in shots on target, shots off target, number of corners and percentage possession.  If, like me, you know nothing about football you may only be interested in goals scored (although percentage possession fascinates me for some reason.)  If you are the club owner then you will be interested in cups won.

These are all KPI’s.  Quite wisely in sport they are not called KPI’s.  They lose the jargon in order not to put you off.

We can draw several conclusions from the above.

1) Not all KPI’s are based on financial information.
2) Different sports need different KPI’s (it’s the same for companies).
3) Different people require different KPI’s.  For example a club owner does not need the same level of detail as a club manager.
4) Don’t let jargon put you off something that is generally useful.

KPI’s can be used to monitor, benchmark, improve performance and ultimately help your business achieve it’s goals.  More later.

Philip Woodgate

KPI's Part 1

I'm often surprised that more SME's don't use KPI's (key performance indicators) to their benefit. Certainly in larger companies they are used widely.  I think the reason for this has to do with resources.  In a large company they have a team of accounting professionals focused on producing the monthly management pack with relevant KPI’s.

Contrast with the SME.  It’s not unusual for the accountant to be head of human resources, car fleet manager, treasury, legal department (sales contracts), insurance and, “oh while you’re at it can you organise the Christmas party”. It’s a challenging role and just producing timely accounts can be difficult, let alone producing KPI’s.  But KPI’s are very useful as I hope to demonstrate over a series of articles in the coming weeks. They can help you see the wood from the trees.

Philip Woodgate

What's a webinar

I was asked today what is a webinar.  It's a good question, although I can't help thinking that within a year the term will be well known.  Like all new technology the boys (or girls) with toys start using them first and then (if they are any good) they become a household name.  Think ipod, cd, internet and you will understand what I mean. Anyway, what is a webinar?  According to webopedia it is:

Short for Web-based seminar, a presentation, lecture, workshop or seminar that is transmitted over the web.

A key feature of a Webinar is its interactive elements -- the ability to give, receive and discuss information. Contrast with webcast, in which the data transmission is one way and does not allow interaction between the presenter and the audience.

In practical terms it often works like this:

1. I subscribe to a webinar provider (say GoToMeeting)

2. I send you an email invitation to my webinar

3. You accept and follow some simple instructions and download a small software programme to your PC

4. We speak over the telephone, the webinar starts and you see my screen

5. I can then show you anything my PC holds e.g. Powerpoint presentation, accounting system, excel spreadsheet etc..

6. You can then take over the mouse and work with my PC

7. The webinar ends

It's simple and hassle free.  Another example of how the internet is removing geographical restrictions.

Philip Woodgate

Setting up a blog

If you are thinking of starting a blog then you must check out David Terrar's blog Business Two Zero.  David has put together a very helpful four part article titled "BTZ's insider's guide to Blogging".  There are so many tips and hints that I expect I will be going back to it for several months to come.  Thanks David.

Update 1 March 2006:  David has now added further information on RSS feeds.

Philip Woodgate