5D IN NAVIGATION TO BUSINESS STRATEGY
Have you ever got lost in the mountains or the woods?
It feels intimidating and scary to end up somewhere else, where we didn’t want to be, not even knowing where we were. Not even mention not being able to use a compass that sticks out of the pocket. It’s a great Halloween experience, especially if it gets dark. Alone.
When I was examined to become a Mountain Leader, one of the main tasks was “night navigation”. To relocate correctly, navigate from point A to point B, and use tools and techniques to help me do so.
The first tool we use is planning and strategy, using features, so-called “tick points”, which would assure me of my location.
You cannot see what is before you when navigating in the dark. I set up my compass and measured the distance, which, in the dark, cannot be a long distance. I stopped every 100 metres, looking for my tick points, and the terrain and checking my bearing.
Drifting off from a bearing by as little as 5 degrees will lead to an error of nearly 50 meters after walking only half a kilometre.
It gave an amazing analogy of management accounting and WHY SMEs need them.
You run a company, a project, or many projects, and you only check your end-of-year tax liability; how can you possibly know if you are not off-bearing?
Many things may happen, such as reworks, overspending, underspending, not completing tasks on time, etc. Even having a plan will not help you if you don’t stop and check your “tick points.”
Strategy is the way to get from point A to point B. If your strategy is to cross the fields and walk kilometres, often in the dark, without choosing tick point features safely and efficiently, you may end up in a deep bog, off-bearing, in a completely different place!
Management accounting is to set up your strategy tick points, targets or milestones and always check if you are on track.
It is not an easy task, but because we are SMEs, that doesn’t mean we don’t need that!
I hear from big players, “Companies with turnover over £10Mn have budgets, targets and regular management meetings with management accounts, all done and dusted. Conversely, companies with turnover between £1Mn and £10Mn are in a MESS”.
Who should we blame? Accountants, who can’t be bothered to put in the effort, or the SME business owners, who say, “We don’t need management accounts”? Or lack of awareness of what is needed?
Are you, an SME Business Owner, aware of your “tick points” to ensure you are on track?