Incubators or business sponsors often compare managing a business to driving a car or stirring a boat.
This picture does a great job conveying new business owners just how many things they are going to need to pay attention to if they want to be successful: hiring the right crew, getting the right engine, etc.
It happens to also be quite relevant in showing the importance of efficient financial monitoring or the potential risks of lack of thereof. In a jest, it’s about knowing where you are going and measuring the impact of your actions on the overall growth of your company.
It’s true for business owners but probably even more important on a department level. For the longest time, business managers thought that it was the job of the accounting team and that the usual yearly consolidation was more than enough. Yes but what if something as critical as going over budget or losing business on a given product reference happens in mid-time? Even monthly reporting is sometimes too late. Does that mean that even finance could beneficiate from going real-time?
The following questions will help you define your own financial Key Performance Indicators:
- Am I reaching my objective? The indicators that you will define will help you validate or invalidate your current strategies. For example, if your objective is to cut off costs on certain expenditures, you will be interested in tracking their decrease overtime.
- How do I know if I’m doing well? Sometimes you are so focused on your action plan that you tend to lose track of the big picture. Ultimately your teams and departments are working towards growing your company. Indicators such as sales growth will help you measure your impact.
- What indicators do I need to embark my team? If you are asking your team to work hard towards certain objectives, it can be very motivating to show them the results on a regular basis. For example, if your marketing team needs to improve their campaign efficiency, it’s important to report on their campaign ROI highlighting the cost of their effort against the related sales.
- What do I need to alert my boss anywhere at any time? This goes back to empowering your managers to make informed decisions. As a business professional, your job includes providing your manager with the right data to make sure that he or she will make the most informed decisions. If you are part of the logistics team, one good indicator to share with your boss could be the level of stock and related financial implications.
Financial KPIs everybody should follow
Managers are often very aware of the importance of having the right KPIs but are also often lacking resources, time or people to implement them. Accounting firms have understood this new requirement of providing relevant insights at all time and in particular:
- Turnover by product reference that month
- Turnover by product reference compared to the previous period
- Expenses by type that month and compared to the previous period
- Net result by product line and by business unit
- Actuals against the budget in sales, expenses and the net result
So what? How are these indicators helping a business manager? Reading these indicators at all time will provide the following insights:
- Are all my products performing the same way and according to plan?
- Did I budget this program or that campaign properly?
- Should I stop this product line completely?
- Should we do more of this particular activity since it has a great impact and the ROI is excellent?
BI tools to the rescue
All your business data in one place
Their first challenge is to compile information coming from different systems. Financial tracking can indeed involve different software, accounting, ERP, sales but sometimes also different database formats especially if several entities are at stake. For example, if the CFO wants a consolidated view of all product lines from the various entities and each of these use a different invoicing system, there will be a need to first bring the sales information into one unique place. Centralizing all data necessary to the financial reports easily is the first advantage of a good BI platform.
Once you have all of the necessary information in the right place, you are most likely going to want to add specific calculations, for example, to track progress against the previous period or to project possible trends upon current results. To achieve that efficiently you will need to massage and transform the financial data that you just gathered. ClicData is the only BI platform that includes these data warehouse features.
Make your data clear, simple and attractive
A financial report is useless if it’s not clear. Nobody will understand it or worse not even read it. Data visualization with efficient and clean indicators will improve the analysis and thereby the decisions driven by the financial compilation. Financial professionals will greatly improve customer satisfaction by providing information that is easy to digest. This is why you will need a large array of visualization widgets to showcase financial indicators in the most interactive and comprehensive fashion.
Pushing reports on a regular basis to the right people is quite useful. Alerting them on important events is even better. Some indicators, especially in finance, require short term reactions especially when large investments are involved. Collaborative features will ensure that relevant financial insights are seen and used to inspire CFO and other key players to make the best decisions.
Let me wrap this up with a concrete example of a clothing brand whose most sales were happening online: they use real-time financials tracking on the product references promoted on their website to negotiate with the corresponding suppliers in the best conditions possible. In this type of case, real-time financial tracking is often completed by powerful models in predictive analytics.
So, what’s your reporting situation?
If you don’t have a BI tool to help you monitor your business data and performance, you can always signup for ClicData 15-day free trial.
You can create as many dashboards as you want and even use our financial dashboard examples with your own data.