Business Intelligence Software: From the Enterprise to the Small Business
One of the biggest buzz terms in IT and business management is business intelligence (BI). More and more companies are searching for business intelligence software and it is important to know what BI software can do for you.
Business intelligence modules were initially designed for large companies. The focus was to take all the raw data locked up in financial and operations systems and turn it into useful business information. While this software has been readily available for many years for large companies, BI modules targeted toward small to mid-sized businesses are fairly new to the market.
Drawing the Distinction Between Reporting and Business Intelligence
Nearly every accounting software available has reporting tools. Some solutions offer budgeting solutions integrated into their accounting software. There are many stand-alone solutions. Often times the financial reporting and budgeting modules are not integrated and often times gathering reports from these modules requires time intensive data mining to obtain the necessary information.
Business intelligence software is designed to gather the data, sort the data, create visuals, help you analyze and report. For most systems, it is easy to extract data and dump into a spreadsheet. However, it is what you do with that data that is important. For the most part, business intelligence software is geared toward higher levels of management. The idea is to give key decision makers the ability to make decisions based on relevant business data, rather than just instinct.
What sets business intelligence software apart from standard reporting is the ability to report on financial and non-financial data alike. Not only do you want to see your profit margin on each widget you built, however, you also want to see the time it takes to produce each widget, parts and materials used to produce the widget, waste or scrap, how many were produced per hour by each employee, etc. This information will help management make decisions going forward such as: Do we hire more employees? Can we afford to take on a new customer that will double the output? Will a new machine speed up the processes and efficiencies of the manufacturing process?
Who Needs a BI Program?
Business intelligence software is used in virtually every industry. Consulting firms need to track project information. They need to see productivity by employee along with statistical data about each project. Retailers need to track profitability by sku, set goals of how many units to sell per hour to be profitable on a give day. Financial institutions set goals for their personal bankers as to how many accounts each banker opens during a month. Beyond just the number of accounts, what type of accounts and the amount of new money brought into the financial institution.
It all starts with creating Key Performance Indicators.
Key Performance Indicators (KPI’s)
Key performance indicators are commonly used by organizations to evaluate the success of a particular activity in which it is engaged. Traditionally, Key Performance Indicators describe non-financial data that is still quantifiable information that is critical to gauging overall business performance. KPI’s help assess the present state of the business and it’s key activities. These assessments often lead to the identification of potential improvements.
There are a few stages in identifying KPI’s including:
- Having a pre-defined business process. Without a predefined business process, you don’t have measurable data.
- Having the requirements for the business processes.
- Having a quantitative/qualitative measurement of the results and comparison with set goals
- Investigating variances and tweaking processes or resources to achieve goals.
Companies often find using the SMART method will help with the key performance indicators.
Specific purpose. Answers the who, what, where, why and which to make the goals specific. Measureable. Concrete criteria for measuring progress toward the attainment of the goal. Attainable. Is the goal attainable? Do you have the resources to reach the goal? Relevant. Are the goals relevant to your boss, team, and organization. Time. Set a time frame for reaching the goals.
Once the goals have been identified and you have solid key performance indicators, a business management system will help track those goals. Graphical reports and sorting/filtering capabilities keep managers updated as to the progress of those goals.
Often times, business intelligence software also is linked with a management dashboard. This dashboard allows key managers to review real-time data as related to the goals and indicators in question.
Financial indicators allow management to see where they stand for the day, month, quarter, and year. Through a business intelligence software, management will also have the ability to review the financial data for the year but also look at and compare current year to previous years. In addition to looking at past data, the business intelligence software also creates projections based on the past performance showing potential outcomes.
Quantitative indicators are a measurable characteristic, resulted by counting, adding, or averaging numbers. Operational systems that manage inventory, supply chain, purchasing, orders, accounting, financial systems, all gather quantitative data by means of KPIs.
Qualitative indicators are not as easily measured. Qualitative indicators are a descriptive characteristic, an opinion, a property or a trait. The most common ones gauge customer or employee satisfaction through surveys. While the survey data itself is quantitative, the measures are based on a subjective interpretation of a customer’s or employee’s opinions.
Business intelligence software boosts efficiency, reduces costs, provides data integration and integrity, provides easy access to decision making tools, allows for quicker recognition of critical information, gives managers the information needed to be more information, and provides the ability to predict events in the future based on historical analysis.