Data tells the story of your business. You don’t have to look much further than your quarterly numbers to reveal a narrative around how that quarter went. Since financial data is tied to the overall story of your financial health, shouldn’t your business goals be built around it— both looking back at historical data and forward-thinking to grow your company?
Goals give your business a benchmark to strive for. Your ability to meet your goals may depend in part on what’s happening in the financial data. Your meeting of goals also determines your ability to turn a profit, creating a goal-financial continuum, a full circle of financial health. To get the most out of your goals and data, you should rely on them to work together, supporting each other and taking your business to new heights.
Bottom line: Goals won’t survive on their own. However, when you align them with data, you’re not only meeting them more easily, you’re meeting the right ones for your business.
Reaching your goals by using data
Your historical financial data helps you understand what’s possible and where you may have missed low-hanging fruit. It informs leaders how goals may need to change for the upcoming financial period and where you may be making costly mistakes.
There’s a simple process for connecting your goals to your financial data and reaping the benefits of doing so.
Start by creating goals for your business
Many businesses have similar goals. You may want to:
- Improve cash flow
- Lower debt
- Improve customer relationships
Start here. Identify in general terms what your goals are for your business. Once you’ve set your goals, you can base your metrics around reaching them.
Track the right metrics
Now that your goals are in place, you’ll need to ensure you are tracking the right metrics to help you achieve those goals. You can’t counteract rising expenses or plummeting customer satisfaction if you do not measure them.
For example, let’s look at the above general goals.
If you want to improve cash flow, you will track:
- Expenses/budget variance
- How closely do your actual expenses align with your budgeted estimate?
- Cost of goods sold
- How much do you spend to produce your products or services?
- Cost per sales channel
- How much does it cost to get your products or services to your customers?
While this isn’t an all-inclusive list of the metrics that play a role in cash flow, it will be difficult to reach your goals if you aren’t paying attention to these specific numbers. Without proper tracking, low cash flow may remain a mystery.
Similarly, to lower debt, track:
- Budget and budget variance
- This is the difference between your budget and your actual expenses.
- Accounts receivable turnover rate
- This measures how effectively you extend credit and collect debts, which determines how efficiently you leverage your assets to make money.
- CCC (cash conversion cycle)
- This is the time it takes to sell inventory, collect receivables, and pay suppliers before you accrue penalties.
Even a goal that may not seem directly related to finances certainly is, as you know. Ultimately, if you want to improve customer relationships, track these and make sure you have an adequate budget allocated to influence them:
- Net Promoter Score (NPS)
- This is obtained through a one-question survey, “How likely are you to recommend us to a friend?”
- CAC (customer acquisition cost)
- This is the cost of gaining a new customer. The lower the cost, the better.
- Customer effort score
- This is how easy a customer thought your sales process was, as determined by a separate one-question survey sent immediately after the sale.
Check-in on your metrics regularly
Once you’ve established your goals and chosen metrics to drive them, you need to make sure you are checking in with them regularly. That said, you need the analytics software, systems, and people in place to deliver data in a usable form.
Remember, tracking data is only important if you actually use it.
When you review your data, if there are areas not producing results to get you closer to your business goals, make an adjustment. Let it be a reference point for making intelligent, real-time data-based decisions to grow your business.
Work with a trusted accounting partner
An accounting partner will help bridge the gap between your goals and your data. You’ll see like never before how the two work together to grow your business.
An experienced accounting partner works with you to set goals that make sense for your business. They help you choose metrics that fit your goals, establish the systems you need to consistently track and analyze financial data, and check in regularly to make sure everything is going according to plan.
creditte is the perfect partner for your business. We help you connect your goals to financial data to grow your organization. Contact us today to learn more about how we can help you use data to reach your business goals.
