How to Analyze Financial Data to Improve Business Performance
Aside from other accountants and bookkeepers, I don’t know anyone who went into business to do bookkeeping. But I do know many business owners and entrepreneurs who went into business to make money.
The two are inseparable. You can’t make money if you don’t know where your money is coming from, so let’s talk about some ways tracking your financial data can help you improve your business performance
- Understand Your Business Performance
You can’t improve your business performance until you know how your business is currently performing, and in order to understand that, you need to be able to access and analyze your financial data.
What does your cash flow look like? How much money are you bringing in compared to how much you’re spending? You need to know the answers to these questions, and only the right financial data can provide those answers for you.
- Make Better Business Decisions
Understanding how your business is performing overall is a necessary first step, but you also need to take a closer look at your cash flow in order to make better decisions for your business. Where are most of your income coming from? And where are you spending money on your business? What business expenses are generating the greatest return on investment and which ones are a drain on your resources? Knowing where most of your income is coming from can help you make better decisions about where to focus your efforts in the future so you can be more strategic about growing your business.
The same goes for your business expenses. If certain marketing or advertising effort isn’t generating a return on that investment, you’re wasting your money and you’d be better off spending it on something that’s more likely to generate revenue for your business. Who doesn’t want to make more money while spending less?
- Set and Achieve Your Business Goals
The key to achieving your goals is to make sure they are specific, measurable, achievable, repeatable, and time-sensitive (SMART). Maintaining and analyzing your financial data can help with all these aspects of setting goals for your business by helping you measure various aspects of your business performance.
Once you know how your business is performing, where your revenue is coming from, which activities/investments are generating the greatest return on investment, you can predict future performance and set goals that are in alignment with those predictions.
- Detect Fraud and Errors
Staying informed on where your money is coming from and where it’s going is key to keeping an eye out for fraud and errors in your financial data. Whether an invoice was marked as paid, but the money never showed up in your account, or money disappeared from your account without a matching expense, these instances of bookkeeping errors and fraud cost you money, and the longer they go unnoticed, the more money you stand to lose. By staying on top of your financial data, you can prevent financial leaks and put a stop to any leaks as soon as they happen.
Need Help Maintaining and Analyzing Your Financial Data?
Whether you need someone to analyze your financial data and help you make better business decisions, or just someone to enter the data so you or someone else in your company can analyze it, I can help. I offer a range of accounting and bookkeeping services for businesses of all sizes to help you keep your company’s finances healthy.