Richard Morochove -- How Small Businesses<br></br> Are Thinking About Technology

In this issue we talk to business consultant and broadcaster Richard Morochove about how small businesses use technology and, in particular, how businesses are beginning to use financial systems to create business advantage.

Q: How are small and medium-sized businesses thinking about technology and how is that changing?

A: Small and medium businesses range all over the map in their thinking about technology. Some are very sophisticated and have not only an internal network but also a web site for interfacing with their customers and prospects. Maybe they are selling things and taking orders on their Web site as well. Then there are others who use personal computers pretty much on a stand-alone basis internally, don't have a web site, and if they need to transfer something from computer to computer, they use what we call "sneaker net," you know, putting something on diskette or a USB key and giving it to someone else. And then there are still a few businesses that are using what I call the "shoebox" filing method. This is usually a one or two-person operation where they put all their receipts in one shoebox. The more sophisticated have two shoeboxes, one for money in and one for money out. They ship the boxes off to an accountant at the end of the year and say, "Tell me how I did and do my tax return." So there's a tremendous range in terms of the use of technology.

In the more sophisticated businesses, people do want to make the best use of technology because it can make them more efficient and also provide them with more timely information that they need to run the business. If you're keeping everything in a shoebox and hearing once a year from your accountant how you did, that doesn't really allow you to make readjustments in your business plan. Whereas if you do look at your results regularly, you know what orders are coming in and what your sales and profits were last month, if they're not up to your plan, management can make a change in the approach and try to improve the results by the end of the year. That's better than looking at things backwardly and saying "Well, we didn't do so well last year. Too bad."

Q: What do small businesses want from their financial systems?

A: First of all, they expect the basics from their financial systems. They want to be able to keep track of orders. If they're selling products as opposed to services, they need to keep track of inventory, the goods they have on sale. For example, if they're running low on some product, they need to be able to reorder or make some more. If they have too much of some good, in other words, if it isn't selling, they need to know what to do with it. Maybe to convert it to cash, they need to just reduce the price and blow it out the door, because obviously people don't find that particular product very attractive at its current price. Once a product is sold, you want to be able to create an invoice, and if you give your customers credit, obviously you want to be able to keep track of what those customers owe you, and you ought to be able to have an automated follow-up system that can send out statements or dunning letters or print out a schedule for some kind of call-up. You're supposed to get paid in 30 days and if it's been 45 days now, then it's time to give them a call. And of course at the end of the month, you want financial statements to give you profit and loss, to tell you how you did financially.

More sophisticated small businesses want CRM, customer relationship management. This is becoming more important, because it gives you a more organized approach to dealing with your customers. Whereas an accounting system would just keep track of sales that you make to your customers and the money that's coming to you, CRM keeps track of many more things. For example, it would keep track of when a sales rep calls a customer, perhaps trying to sell them a new product line. You could keep track of the customer's reaction, maybe "I'm not interested right now, but call me again in 3 months." Then the CRM system will automatically flag that for a future follow-up. CRM is a way to document more of the interaction that a small business has with its customers, with the ultimate objective of serving those customers better and thereby selling more goods and services to that customer.

Q: Do people think about integrating applications like CRM with their financials? And are there good integrated solutions for them? Are there applications that integrate easily and well?