Current Edition >> Archives Section >> Spot Coverage >> September 2001

The need for information

IN today's competitive business market, every manager must have clear, accurate and up-to-date information for survival. Managers need to decide what is the most important performance indicator in their business while using this indicator to its full advantage. Examples of these indicators would include the following situations; In a cafeteria it would be important for the manager to monitor the sale of a certain food item, and be aware of the fluctuating customer numbers at all time of the day. In a hotel, the number of guests allowed or the number of rooms occupied would be important. The number of patients admitted to a hospital and the length of stay of each patient is important.

Managers must have the most recent information so that it can be measured up against their planning, control and decision-making functions. This affects decisions that are made and in turn will have an influence on the time it takes to address a problem.

• Planning: In order to choose their goals, predict results under various circumstances, and then decide on how to attain these goals, managers need to plan ahead. With this information, managers can set up accurate annual or monthly budgets. How? Information about sales and costs can be obtained from previous year's records, necessary adjustments (increases or decreases in prices) for the coming year must be provided and a budget for the coming year / month can be compiled.
• Control: In order to constantly be aware of the situation in his business, managers need to be in control. The control function covers both the action that implements the planning decisions and the performance evaluation of the personnel and operation.
How? A comparison must now be made. The budget {set up in 1 above}and actual results obtained must be examined. Differences between what was supposed to happen (in the budget) and what really (in the actual results) must be identified. • Decisions: Based on the comparison between budgeted and actual results {in 2 above}, management must now use their decision-making function by taking corrective steps in trying to explain what went wrong or what went right.

How? After explaining the differences, action must be taken to ensure that the negative points do not occur again, while any positive factors be promoted to advantage of the business.

It is always important to remember that financial statements do not necessarily reflect what is currently happening in a business. This information is often already old news. Furthermore, financial statements are usually drawn up for stakeholders and report information on performance and not for managing the business. To be successful in business it is vital to have timeous management information - information that gives a clear indication of areas that need to be managed from an operational point of view.

Thus the question to managers is, “Do you base important decisions in your business on accurate, timeous and relevant information?”. If not, chances are that your business could be performing much better than currently - if you just used this information.