Know your numbers?
There’s no getting away from it, running a small business can be tough. Managing day-to-day operations, keeping customers happy, finding new customers, staying ahead of regulatory changes, the challenges can seem relentless and ever more demanding of your time.
This is precisely why it’s now more important than ever to be on top of the numbers that drive your business. Accurate, up-to-date, reliable financial and non-financial data showing how you are performing is now essential for any business, regardless of size. The good news is, it’s easier than ever before to have this information in place.
So, what sort of data are we talking about? What are the benefits? How do you go about collecting it and how do you use it for maximum impact?
Data analytics is rapidly changing the way businesses are operated. By making use of your financial and non-financial data, you can quickly start to gain a deeper insight into your operations, performance and financial management.
Data-driven decisions are quickly becoming the norm, for even the smallest business. Data analytics allows helps you spot the patterns. Understand the data trends. And preview the upcoming threats and opportunities for improvement.
As Chartered Accountants, it will be no surprise that we say everything starts with excellent financial data. So, what does that mean?
Sort the basics: There is now no excuse for financial records which lag behind the day-to-day running of the business. Cloud accounting platforms and integrated apps mean that bookkeeping can now be done in real time meaning that you can see an accurate financial picture whenever you want, wherever you are.
Real-time financial reports: Accurate and up-to-date financial data allows you to generate real-time information on financial performance: sales, costs and margins, cash flow, how much your customers owe you and how much you owe to suppliers and HMRC.
Budgeting: Create a budget at the start of your financial year setting your targets for sales, profit and cash flow. Track actual performance against budget so that you can see how your business is performing against targets. Spot where things are off track and take action to bring them back in line. Understand what is going well and capitalise on the opportunities this presents
Forecasts and what-if scenarios: Looking to invest in plant and equipment, grow your team or beef up your marketing? You can model how these decisions will impact profit and cash flow.
Tax compliance and liabilities: Let’s face it, your business plays a role in collecting taxes and paying them over to the government. VAT, PAYE, corporation tax, all are reported and paid in arrears. It is vital for a well-run, ambitious business to know how much tax it has to pay, when it has to be paid and to make tax returns on time.
Whilst it may start with financial data, it doesn’t end there. Here are some other key areas where having the data and using it to run your business will significantly improve results.
Sales trends: Analysing sales data allows you to identify trends and capitalize on them. You can adjust your inventory, pricing, and marketing campaigns accordingly.
Customer insights: Detailed customer data such as buying frequency and average transaction value helps you understand your target audience better, enabling you to tailor your sales and marketing strategies and product offerings.
Stock levels: Accurate inventory data ensures you never run out of stock or overstock, optimizing your cash flow.
Supplier relationships: Knowing your how much you buy from your key suppliers and understanding you inventory needs helps in negotiating better terms and ensuring a consistent supply chain.
Employee data: Reliable employee data ensures accurate payroll processing, reducing errors and potential legal issues.
Growing, retaining and taking care of your people: You can analyse employee data to identify areas where training or hiring may be required, improving overall productivity. Capturing the relevant data will also help identify wellbeing issues.
Production and workflow management: For a manufacturing business – what are the standard costs per unit produced and how do actual costs measure up against this? What about leakages such as wastage and downtime? For a service business – track job costs in real-time to spot potential cost and time overruns. Identify leakages such as non-productive time and sub-optimal scheduling.
By collecting, analysing and making sense of data, you can gain valuable insights into your performance. This means you can quickly identify the areas that need improvement and the opportunities in the market – while making data-driven decisions about your future.
To deliver the best insights from your data:
Identify which data and metrics are most important to the business – what are the key numbers and drivers of success for your particular business? By analysing your data, you can determine which data and metrics are most important to your business and track these numbers.
Track your Key Performance Indicators (KPIs)– your cloud-accounting platform can provide a dashboard showing all your financial KPIs in one place. To add to this, you can also integrate with industry specific or tailored reporting apps to create detailed non-financial management information and reports. Tracking and reporting on these key numbers helps you analyse your data, create detailed breakdowns of your business information and monitor your sales, business and financial performance in real-time.
Look for the patterns and opportunities in the data – what you’re looking for in your data is the trends, patterns and insights that will help you become a better business. Pull out the trends in your customers’ behaviour, spot opportunities for growth and optimise your operations, to help push the company towards success. Non-financial data about customer behaviour and experiences can also be invaluable. When you know your customers’ expectations and spending habits, that gives you the foundations to tailor your products and services to their needs. It also helps drive sales, revenues and get a better return on investment (ROI) from your operations.
Smart data-analysis – with the help of artificial intelligence (AI) and machine-learning applications, you add the ability to sift, filter and compare your data in superhuman ways. AI can process and analyse data at a speed and volume that would be impossible for a human being. Software can measure progress towards goals or detect variances in budget numbers, flagging up these insights as notifications in your dashboards and management information.
When data is accurate, timely and insightful, the benefits are significant…
Informed decision-making: Accurate data empowers you to make decisions based on facts rather than guesswork and supposition. Whether it’s expanding your product line, entering new markets, or adjusting your pricing strategy, you can do so with confidence, knowing you have the right information at your fingertips.
Improved financial stability: With real-time financial data, you can monitor your cash flow and make necessary adjustments to smooth out peaks and troughs and ensure you don’t run out of cash. This is crucial for small businesses that often operate with limited capital.
Enhanced customer experience: Understanding your customers’ preferences and behaviour allows you to provide tailored products or services, ultimately leading to higher customer satisfaction and loyalty.
Competitive advantage: Small businesses that leverage data effectively gain a competitive edge. You can spot emerging trends, react to market changes faster, and stay ahead of your competitors. These tools help you identify new market segments, spot opportunities for growth and optimise your operations to stay competitive in the market.
Regulatory compliance: Accurate data ensures you stay compliant with tax laws, employment regulations, and other legal requirements. This minimizes the risk of fines and legal issues.
Efficient operations: Production, workflow, Inventory and employee data help you streamline your operations, reducing leakages and wastage and improving efficiency.
Scalability: When you have accurate data to support your growth plans, scaling your business becomes more manageable. Investors and lenders are also more likely to support your expansion efforts if they see solid data backing your proposals. If you are looking to sell your business, robust data demonstrating viability, repeatability and sustainability gives a buyer confidence and enhances value.
Talk to us about employing data analytics
Accurate, up-to-date, and reliable financial and non-financial data is not just a nice to have; it’s an essential tool if you want to stay competitive and grow your operations. It enables you to make informed decisions, improve financial stability, enhance customer experiences, and gain a competitive advantage. While managing your business may seem overwhelming at times, never underestimate the power of data—it can be the game-changer to take your small business to the next level. Invest in data management tools and seek advice and support to ensure you’re harnessing the full potential of your data. In the fast-paced world of business, data is the key to success, and it’s time to unlock its potential for your small business in the UK.
We’ll help you track the right data, produce the most insightful management information and deliver the insights you need. Whether your goal is improved business outcomes, cost savings, increased revenue or improved customer satisfaction, we’ll help you sift through the data and make informed decisions that will drive the future of your business.
