Over the past few years, data has rarely been out of the news. Whether it is the trials and tribulations of leaks and data breaches or the incredible advances in technology, medicine and sport achieved as a result of measuring and analysing, there is no question that data is a vital element of life in the 21st century.
So what has all this got to do with me running my business? Most people will be aware of the increasing demands made by
But I’m not here to rant about the impending MTD (Making Tax Digital) changes, or indeed anything else. On the contrary, data can be a valuable asset to help us run our businesses more efficiently and cost effectively.
The bottom line is this:
Knowledge is power
Knowing the numbers
Most useful data boils down to numbers. Knowing the numbers gives you the power to control your business more effectively. So where are these numbers and how do I use them to help me manage my business?
In this article, it isn’t realistic to go into a lot of detail. Instead, my aim is to give you some ideas and food for thought that you can explore further. Naturally, I would be happy to talk with you one-to-one if you wish.
Over 2 articles, I will look at areas of business which apply to everyone. Both are lucrative sources of data to help you with your business:
This time, I am looking at probably the primary source of hard business data – your accounts.
The Business Value of Accounts Data
In my 30+ years in business, I have stood by one fundamental
If I am in control of my accounts, I have control over my business.
If ever things are not going so well (it happens!), then my business may struggle. But at least I will know why it is struggling, giving me more chance to do something about it!
I have come across many businesses where ‘accounts’ is just something that has to be done once a year so that the legal requirement to submit a tax return and pay what is due can be ‘ticked off’. Normally, this is done by handing over one or more boxes of documents, possibly along with a few spreadsheets, to an accountant who then charges a not-inconsiderable sum to make sense of it all!
How does it work if you don’t know what you are owed or what
Knowing your accounts
If you haven’t done it already, take a look at one of the growing number of cloud accounts packages out there. I told the story of our own experience moving from 20+ years of Sage Accounts to the brave new world of Xero in this article. Now, another year on, I am even more pleased that we made the move. We always handled day to day bookkeeping in-house but what used to be a bit of a chore has become almost unnoticeable. It pretty much just happens now.
Look at how much you pay your accountant and compare with the cost of a cloud accounting system (some even offer a free option for very small businesses). I’m not suggesting that an accounts package can (or should) replace the advice of your accountant but they can certainly take away a good deal of the donkeywork. I find Xero so intuitive that what used to be 2-3 hours a week of bookkeeping is now down to less than an hour and even that time can fit into snippets of 5 or 10 minutes which would otherwise be dead time. I can check and process a couple of regular invoices while I wait for the kettle to boil!
Speaking to friends and clients, I hear similar stories about the other leading cloud accounts systems. They are all easy to use from your PC and have good Apps so you can even keep on top of your accounts from your phone while you are out and about.
Accounts data to help your business
Here are my top 3 ways that having control of accounting data can really help your business
Running out of cash is the number one reason that businesses fail. Furthermore, profitable businesses can still run out of cash.
By keeping your accounts up to date with Sales and Purchase invoices as you create them (easy on the cloud!) and regularly reconciling with your bank statement (almost automatic!), you will know how much cash you have, and – most important- how much of it is yours.
2. Credit Control
You can run out of cash simply because your money is in someone else’s bank account! Knowing who owes you money and getting them to pay is a great way to avoid cash flow problems. Many cloud accounting systems have add-on apps to help with all sorts of things – including credit control. Like accountants, solicitors have a role to play in business but there is often a lot you can now do for yourself without the expense of a legal claim.
3. Business Planning
- Which customers are your most profitable?
- Which products or services deliver the highest margin?
- Do you have customers that actually cost you money to do business with them?
The answers to these questions can deliver real insight into your business. If you know and use your accounts data as part of your day to day business, you have access to the information you need to help you plan the way ahead.
We talk regularly about the importance of business planning. Being able to plan based on proven, reliable data, make your plan real. Too much reliance on speculation can create a plan that looks great to start with but is very challenging to stick to. OK, sometimes educated guesses are necessary, it’s is part of the business risk-reward, but successful businesses normally hedge their bets!
Next time I will look at how marketing can deliver data to help you understand how your marketing is working and whether it is actually doing good for your business. This isn’t always as easy as you might think. In fact, often the most important thing is being able to see what is NOT working for you and your business. Then you can stop and do something else instead.