How to Fully Utilize your Financial Data to Make Informed Business Decisions
By: Jessica Rickard | January 27, 2021
Data-driven decision-making is becoming more essential in helping businesses optimize existing operational efforts, drive more opportunities and increase revenues.
A recent Mckinsey Global Institute report shows that data-driven businesses are 23 times more likely to retain and attract customers. Through data-driven decision-making, organizations can set and track key performance indicators and employ incremental changes to improve their overall efficiency.
Perhaps the most significant information that can help businesses make educated decisions are financial statements. With multiple sources of financial data, organizations can create a strategic plan that would help them lower costs and raise profitability to achieve long-term growth potential.
Read on to find out how you can take advantage of your financial data to make smart decisions and maximize the profitability of your business.
1. Financial Data Assessments
Assessments are constant in the business scene for you to systematize, explain, formalize, and convert data into useful information. An excellent way to utilize your finance data is to conduct an in-depth data assessment on your financial position and research your target audience and competitors, which are vital in creating and protecting your brand. Financial data evaluations let you provide stakeholders with concrete information to make educated decisions.
Having an accurate financial data assessment gives you an overview of your financial health and offers investors information to determine if your company is stable and profitable to warrant monetary investments.
2. Comprehensive Risk Profile
Running a business requires managers to take risks to achieve set goals. Unfortunately, risks differ in several ways because of the influential factors that come with it. Therefore, managers should come up with a comprehensive risk profile of their business to gain complete understanding on what they can afford to lose.
One way of creating a detailed risk profile is using your financial data in the classification process. The use of financial data contributes to achieving proper risk profiling by ensuring that the distribution of your higher-risk and lower-risks chattels are congruent with your current situation. Taking into account your current situation also helps mitigate risks that bring adverse effects to your business, thereby ensuring uninterrupted operations.
3. Cost Estimation of Future Business Projects
Leveraging financial data lets you evaluate information from previous projects, particularly on how you used the project . This helps you create a cost estimation that is within stakeholder’s constraints for your future projects while keeping in mind the impact of taxes and payroll on your business.
By using financial statement analysis for decision making on future business projects, you can determine which ones can contribute positively to your bottom line. It also increases the credibility of your pitch to your stakeholders. This is because cost analysis will display how much revenue your project will generate and the resources required to make it successful.
4. Investment Analysis
Investing empowers businesses to grow and become profitable. However, not every investment opportunity can yield desirable revenues, and in some cases, it might even result in catastrophic financial losses. Therefore, organizations must analyze the resale, risk, and profit values of their investments to ensure continuous cash flow stream.
Financial data provides businesses with specific parameters on the investment opportunities that align with their budget and unique goals. They can also use historical information of past returns and tie it with recent trends and ratios to project the future performance of their investments. This way, businesses can ensure that they can take the brunt and avoid significant losses should their investments fail to pan out.
5. Strategy Planning
Planning an effective strategy requires several components including the ability to read and interpret financial data. With financial data, businesses can project their profit and loss statements and build strategic models that can enhance their operations.
You can check various business intelligence software options here to find a solution that suits your business. Nevertheless, employing a business intelligence platform allows you to bring down complex financial data into information that is easy to digest even for non-technical people. By keeping financial data simple and accessible, businesses can ensure that their team members can contribute insights that will make their strategies more effective.
Using Financial Data for Educated Business Decisions
Financial data has become more than chunks of information waiting for organizations to get rid of. It has transformed into a source of knowledge that can guide businesses to improve their strategy and profitability thanks to the emergence of business intelligence tools. One of the prime business intelligence solutions that continue to disrupt the industry is Path by Simplex.
Path is a first-of-its-kind social financial platform that empowers businesses to connect team members and collaborate in a centralized location. Developed by Simplex Financials, this easy-to-use business intelligence platform also works well with third-party solutions like QuickBooks Online, allowing you to transform your financial data into actionable insights. Path offers a free trial together with Starter, Pro, and Expert packages.