Part 2 in a 4-part series
This is part 2 in a 4-part series examining the effect business software can have on company growth.
“You can’t manage what you don’t measure”. Growing your business requires managing many different variables, and measuring them can become a time-consuming effort if your software cannot provide the data you need or produce it easily enough. Many companies find that their growth has outpaced the software’s ability to measure, report, and facilitate the analysis of their actual costs and receivables.
The decision makers in a growing business need to evaluate the impact on growth and profitability of items such as cash flow, inventory, production rates, payroll, resource availability, payment cycles, and sales cycles change over time. Being able to measure these items, analyze the historical data of the company in increasingly sophisticated ways, and make accurate projections enables business owners to grow the business optimally and faster. The business software in use should make these complex measurements and analyses simple, otherwise you could find yourself spending far more time analyzing your business than growing it.
Many companies – in fact nearly all of them – do not have a good handle on their internal costs for routine functions such as order processing, inventory control, processing invoices or paying their bills. They may continue using inefficient processes to accomplish these tasks simply because that’s how they’ve always done them, or because their software and systems do not support anything else. In some cases the software does not even provide any reporting capability on these functions, and the business owners never challenge the status quo simply because they have no way of determining areas for potential improvement in their company.
Most business owners believe that the patches and updates available from the software vendor for their existing systems provide increasingly sophisticated functionality. This is not usually the case, since software is engineered to meet the needs of a certain segment of business – usually determined by revenue size. Start-ups don’t choose software that has the features and functions needed for larger organizations because they don’t need those functions and it doesn’t make sense to pay for them before they are needed. However, not all updates, add-on modules, or patches provide enhancements to the software. Instead, they are created to maintain the existing functionality in an ever-changing technology environment. That means that the reporting and analysis capabilities of the software are always going to be about the same as when the first version of that software was installed.
In cases where not enough information is available, or the information is not available for analysis and reporting through the software, business owners would be wise to look into the newer software packages and migrate to a new system. Contrary to many business owners’ beliefs about migrating, when the new software is chosen appropriately, they will find that the total cost effectiveness of implementation of a new system is less than the cost of doing things in the same way they have always done. In other words, the cost of holding onto the old software is actually driving up their operations costs in ways that are totally avoidable.
Reports and information that that can be generated with the software used by startups does not always provide the business owner with a good snapshot of the current position and growth rate of the company or help predict the variables that will create obstacles to further growth. Even when it does provide a snapshot, more sophisticated data manipulations and reporting are usually not available. Financial forecasting and Change Impact Analysis models need good data to be accurate and reliable. Most startup software systems do not include the level of sophistication necessary to create accurate models, and the patches and updates typically do not change that. Migrating or – at the very least – adding modules designed to provide enhanced functionality is frequently a better action to take than just trying to get by with the systems in use.
Jack Bleiberg is a Business Growth and Productivity Expert who can help you determine if the business software you are using is optimal for your business growth goals. Contact Jack today for a free consultation.