Bookkeeping vs. Business Information Systems

Marilyn SanfordsmartPRENEUR Blog Series

Most small businesses hire a bookkeeper to keep track of the details and ensure that the business information is properly recorded, as well, that the financial records are maintained.    This does not, however, provide business insights.  

Bookkeeping serves as more of a preliminary function through the straightforward recording and organizing of financial information” Note

Small firms can rarely afford to hire an Accountant who would have deeper skills and be able to produce more timely and informative insights into the business operation.   So for many small businesses, finding ways to stay better informed so they can integrate ongoing improvement in their operations, is often ignored or inefficiently done. 

Money Flow vs. Business Intelligence

There are business systems in the market developed to address sales proposals and inventory management and, in some cases, offer additional information tracking and business intelligence for the business as a whole.   These cost considerably less than an Accountant and many are designed to collect information at key junctures within the natural business flow.  However, before actually looking at what tools are available, be clear that bookkeeping systems are not business intelligence tools.  They do capture the flow of money, both in and out of the business, and address reporting to meet regulatory requirements for taxation and financial statement reporting, but they do not provide meaningful business information that is timely or relevant to operational efficiencies.

As a business owner, you want meaningful insights throughout your business processes, not just at month and year end.   Bookkeeping will capture financial information to ensure timelines are adhered to but, rarely does the bookkeeper adjust for inventory use, or jobs in progress, or provide insights into productivity or other processes within a business.  Bookkeeping software is not sophisticated enough to give owners the necessary, timely, business information needed to make effective decisions. That requires a business information system. 

I’m amazed at how many businesses use excel to quote jobs.    I hear the arguments:  it’s simple, it does all the calculations, change orders are captured, we’ve done this for years, it’s inexpensive and it works.   What I argue, is that they don’t know what they’re missing.   In their marketplace, knowing where and how a business can be the best, as well as how and where to make continual improvements, is fast becoming table stakes given today’s competitive world.  Minimizing surprises both to the client and internally is essential.  As well learning how to grow job margins, without losing competitive advantage, are all part of sharpening the saw.  

The use of Business intelligence is growing.  

Take a look at this graph, which shows the average spend per employee on business information systems for small businesses in North America.

In 2023, according to the U.S. Chamber of Commerce, 95 percent of small business owners in the U.S. report using at least one type of technology platform in the running of their business. Technology and data are seen as the backbone of operations for many small businesses, with 87 percent reporting that technology platforms have helped their businesses operate more efficiently.

For small businesses with very-high tech usage—those that use six or more types of technology—four out of five report growth in sales, employment, and profits. Notably, 79 percent of the high-tech adopters reported growing employment compared with only 62 percent of low-tech adopters.

Seventy-eight percent of small businesses reported that technology platforms helped them cope with burdens of inflation and supply chain disruptions without passing rising costs on to consumers.

Seven out of ten small business owners agree that without access to technology platforms, their businesses would struggle to survive.

Nearly three in four small businesses articulated that tech helped them compete with larger companies and that same number indicated that losing access to data would harm their operations.

It’s a pretty good bet that those using spreadsheets and or bookkeeping as their primary business software, are leaving money on the table.  Also more and more businesses are understanding that competitive advantage comes from utilizing business systems.   If a business is not constantly feeding improvements into their organization, through training, systems adoption, and constant product evaluations, their competition likely is.   It is becoming table stakes in an increasingly intelligent and competitive marketplace. 

About the Author

Marilyn Sanford

Marilyn is a Professional Accountant. She spent 23 years running trade based businesses, offering Low Voltage Custom Integration solutions to demanding and discriminating customers for high end residences and businesses. She has served on boards, taught in her Industry and is a Fellow of the Custom Electronic Design and Installation Association (CEDIA). Marilyn Co—founded Smart fx in 1992, merged with La Scala in 2000 and later acquired LaScaIa in 2007. Over the years running a custom installation business, she learned what it takes to run a profitable business dependent on construction timelines. These insights and lessons learned, delivering ‘skilled labour’ as a primary service offering, were the seeds that grew the LincEdge concept.