Financial Data: 3 Steps to Use Data for Smart Business Decisions
Updated: May 7, 2021
Raw data describes the facts and figures that a business processes every day. Over time, every business hoards a certain amount of data, and it only becomes meaningful to a business after it has been processed to add context, relevance, and purpose.
For example, in a restaurant, every order will be recorded. However, a restaurant owner won't learn much by looking at each one in isolation. But if the restaurant owner digs deeper, then analysis of the orders will reveal trends and patterns, such as peak dining days or biggest-selling menu or bar items. Knowledge of the business comes from the relationship between the singular pieces of information. That restaurant owner may know to do their biggest stock order on a Wednesday by analyzing their orders and establishing that sales increase by 38% on Thursdays.
The pace of business in today’s technological times requires businesses to react quickly to changing demands from customers and environmental conditions. The ability to be able to compile, analyze and act on data is increasingly important. In some instances, a high volume of data may need to be accumulated and analyzed before trends and patterns emerge.
When you aren’t compiling accurate business data, you can only rely on gut feel and past performance assumptions to inform your future business decisions.
If your business is already using cloud software for accountancy, project management systems, or CRM, you’re likely sitting on a goldmine of data. If properly utilized, this data can greatly aid in running a successful business. You'll have valuable insight into your sales, expenses, profit, cash flow leak, and process efficiencies that can help you answer critical questions and drive smart business decisions.
Every business is unique, but here are three quick tips to help you drive data in your
1. Data is only powerful if there is context – can you stop to answer these questions?
What is your primary objective (business or personal)?
What is happening in the business?
What isn’t happening?
How can you influence what happens?
Figure out what you’re currently trying to achieve before anything else. It’s important to go back and ask yourself these questions periodically and what goals develop from the answers as answers evolve.
2. The only way your data can help you drive your business is if it’s accurate and organized appropriately – ask yourself:
Are your financials up-to-date?
Do you have any unreconciled transactions?
Are you tax compliant?
Are your staff trained on what systems and processes to use for different parts of your business?
Are your cloud systems being correctly utilized?
The worst thing you can do is attempt to analyze incorrect data and attempt to make decisions for the business based on it!
3. Understand what the data must-have is and what the data nice to have is
What would you most like to understand about your business?
What figures pinpoint success for you?
What are your objectives over the next six to twelve months and two to five years?
Remember to focus on what truly matters and build from there.
We are here to help when you need it. Let us show you the tools to use and which financial data you must have to drive strategic and smart business decisions aligned with your purpose. Let's chat.