It was a classic case of commercial confusion. The small automotive business had doubled its turnover – but profits remained at their previous level.
Head of Advisory and Director of Innovation for accounting and business advisory firm BDO, Adam Davy says the husband-and-wife company couldn't believe it: "They were working oh, so hard, saw the turnover doubling and thought they were doing really well.
"Their business was in the cloud and they thought they were doing the right thing."
But, like many companies in New Zealand, just being in the cloud isn't enough. You have to know how to use it properly, says Davy. BDO ran a simple dashboard exercise which highlighted the problem.
"When we got in there, we found that it was a margin issue. Your turnover can go up but if you don't address your margins to take into account things like the extra people and costs you are incurring to boost turnover, profits do not follow.
"But if you don't know that, you think you are doing very well. They were in the cloud but they didn't understand what that meant – and a lot of people don't, sometimes even accountants."
Another example was a large not-for-profit (NFP) organisation which had similarly migrated its business data and operations to the cloud. However it worked through a mostly outmoded desktop system and a single accountant operator.
"What they'd done was essentially replicate their old, manual system in the cloud," says Davy. "They thought they were doing everything right too – they had transitioned to the cloud and had committed to Xero.
"But when we had a look, we discovered they had a problem with recurring invoices and we showed them that one of the key benefits of the cloud was not just being there but using it properly. We showed them ApprovalMax – a cloud-based work flow, approval and authorisation app."
With that in place, the NFP revealed the organisation had been missing out on $500,000 worth of invoicing.
"You can imagine, that had a bit of a wow factor," says Davy.
"It's what I call the so-what syndrome," he says. "Most people are on the cloud but so what? Most of them are not employing it properly and they are failing to use its full potential to take their business to the next level.
"The cloud is really just a ticket to the game," he says. "It's a beginning. It's a terrific enabler of how you run your business – the amazing things you can do with data means you can make much faster, assured business decisions.
"But its main value is in the next step." says Davy. "You can't just get to the cloud and say, OK, that's done – you have to find the best way to get to that next level."
That's where BDO comes in. They have a wide range of solutions, most of which are encompassed in BDODrive – a series of tools and resources specifically designed to enable clients to do better business, with the use of cloud technology, and what these tools can do to enable clients to harness technology.
Davy says: "We often see businesses run by people taken up with the day-to-day aspects of their business. It's the old story – they are working in their business not on their business, like the first example above."
BDODrive addresses this with a combination of professional and technological resources that helps clients to streamline their day-to-day functions, delivering real-time information allowing them to make better decisions, giving them access to expert thinking and ideas and the latest business tools.
It has been launched in a number of countries across the BDO network – the US, UK, South Africa, Europe and Australia.
Its services include a business review program, action plans, succession and exit planning, forecasting & budgeting, financial analysis, data analytics and KPI dashboards, governance and advisory boards, international business advice, cyber-security, moving a business to the cloud and Colour Accounting (a revolutionary way to teach accounting to non-accountants).
For more information on moving to the Cloud and to download BDO's free Cloud eBook, go to www.bdo.nz/thecloud