Do you have the right financial information to run your business?
MANY companies fall into one of three pitfalls with their financial reporting – a lack of up-to-date financial information, incorrect financial information, or too much financial information. Each one causes different problems, so it’s important to find the right balance.
Having up-to-date financial information means that business decisions are well informed. Without real-time financial information, making sure your prices are right, hiring employees, forecasting, closely monitoring overheads and fundamental changes to your business model will be guesswork.
You also need to make sure that you have the right financial information to drive the growth of your business. Comparing your monthly profit and loss accounts to last year may not be enough. It is therefore important to understand the main drivers of these results.
Each sector has industry standard Key Performance Indicators (KPIs), which should be considered alongside your bottom line. Some KPIs will be “key metrics” that will provide a snapshot of results in the coming months. Business owners need to drive these KPIs to get the results they want.
On the other hand, you might have financial information pages with lots of supporting documents. All the information about your sales pipeline, overhead analysis, profit percentages, and conversion rates is there, but it can lead to a distracting amount of information to read and interpret each month.
Business information overload is a common problem and is not easily identified. Any reports you receive may have been useful in the past, so you continue to receive them each month. The reality is that some financial metrics are more important than others and it is just as important to determine how often you receive this information.
Having a ‘dashboard’ of live KPIs and financial headlines helps business owners focus on what is important and take immediate action when necessary, limiting the scale of the problems. emerging problems before they develop. Likewise, providing your finance team with clear metrics about what monthly information you need will limit the volume of supporting documentation you receive each month, allowing you to focus on what’s important to the future of the business.
Whether you’re drowning in financial information or lacking the right numbers to make business decisions, Armstrong Watson’s outsourced accounting services can help you get the financial reports you need. For more information contact Helen Robinson on 01609-702009 or email [email protected]