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Waving not drowning in the storm

Comprehensive and reliable management information systems are crucial for any business to weather the economic storm says Alan Williams, managing director of Southampton-based independent chartered accountancy firm HWB.

British businesses are in the eye of an economic storm which looks set to leave thousands of casualties in its wake. The Financial Times reports that more than 38,000 British firms face closure in 2009. It is therefore vital that the information on which business owners base some very tough management decisions is both timely and accurate.

A well-managed management information system (MIS) provides all the key performance indicators needed in order to run the business. Management accounts showing actual results against budgeted and cash flow requirements form the bedrock of any MIS. But all key areas of a business should come under scrutiny and be carefully considered by the directors and management team.

In good times businesses can, to a greater or lesser extent, get by with limited management information. But in today’s economic climate, having quality information on which to take decisions and take them quickly can mean make or break for a business – and possible personal liability for a director of that business if it finds itself in trouble.

Bank covenants often include the requirement to supply regular management information. Banks will be insisting upon and reviewing management information more closely to identify problems at an early stage. Failure to supply information on time will be a breach of the bank’s covenants, which could ultimately lead to the withdrawal of much-needed funding facilities.

A company with an efficient, up-to-date MIS will have a clear picture of all aspects of its business at any given moment in time. This should ensure that potential issues are flagged up before they create serious problems and enable directors to respond to changing market conditions and make best use of human and financial resources in both the short and longer terms.

“As part of our strategic approach to helping our clients we assist them with the development and interpretation of their management information,” explains Williams.

“We pride ourselves on our ability to support clients with practical, hands-on advice at a strategic level and do so much more than just the year end compliance work! Our aim is always to become, in effect, an additional member of the management team – it’s what clients tell us sets us apart.”

Whatever the situation, there’s no doubt that the experience of someone able to stand back from the day-to-day operation of a business and give an independent opinion to the interpretation of data is invaluable. “Assumptions have led to the demise of many businesses which is why the quality of information used in any decision-making process is so crucial. In some cases a poor MIS is worse than none at all because information which is incomplete or out of date can only mislead, resulting in ill-informed decisions which can be damaging,” continues Williams.

“But if you know the areas of the business that are performing well and those which aren’t and have the data to prove it – then you are in a strong position to make well-informed decisions that will have a positive impact on the future success of a business.

“The tide of information is relentless but businesses that realise its importance and have specialist help to harness its effectiveness are the ones that will be waving, not drowning through 2009 and beyond.”

HWB has developed a ‘tough times’ checklist of action points which is available to The Business Magazine readers free of charge.

Alan Williams
023-8046-1200
alan.williams@hwb-accountants.co.uk

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