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How to Use Data to Make Better Business Decisions

Making any business decision is difficult. As a small business owner, you may be the one person everyone expects to create the pathways that are most prudent for your business. Here’s the biggest problem with this. So many factors play a role in your decision-making processes that this can be an overwhelming task.

We have a solid solution—data. Use customer, operations, inventory, and financial data to propel your business forward. If you are ready to start making better business decisions, start with establishing business goals, determining the appropriate metrics to track, analyzing data, making adjustments, and learning who can help you get to where you want to be.

Start by setting goals

The best way to make good use of your data is to set achievable, proactive, and business-friendly goals. Once you have just one goal set, put it on paper and turn to data to achieve that goal. 

Here is an example of how to reach this with goal setting and data analysis:

Let’s say you want to increase your cash flow by five percent by the end of the year. You’ll use business and customer data to help you make decisions about best practices to update your business for this financial goal. This way, your business will get to the goals you and your team set forth without getting distracted and delayed.

Track the right metrics

To find the appropriate data, you have to track the right metrics, meaning your metrics should be relevant to your goals. Otherwise, you’ll be collecting useless data. Look at your goals for direction in choosing which metrics will be most beneficial to track. 

Let’s look back at the previous example:

To increase cash flow by five percent for the next three to 12 months, depending on the amount of time left in the year, you’ll want to track the following:

  • Expenses and budget
  • Cost of goods sold
  • Cost per sales channel
  • Accounts receivable ratio

Each of these accounts for the money coming in and out of your business, meaning they play a role in cash flow. These metrics will also tell you where you have cash flow holes and other adverse activity hurting your business.

Compare, compare, compare

Once you’ve tracked the metrics, it’s time to compare the data to the data from previous years. Simply knowing the data won’t do you any good. Look at previous year’s data, various data sets from earlier in the year, and data forecasts to see if there is any change or if you are on track to reach your goals.

If change is positive, identify exactly what metric your company has improved on as determined and backed by the hard data. Find out how to implement a similar process in another area or market. If business growth or change is negative or just not where you want it to be, determine what metrics will help your company improve the most right now. This could be focused on the following areas:

  • Inventory
  • Customer acquisition
  • Investing activities
  • Online marketing
  • Physical storefront location

For example, you can boost cash flow from investing activities, which allows your company to have free cash flow (FCF) for the long term. This is an ideal situation. However, you need to be able to identify investing activities that are best suited to your working capital. This might be real estate or bonds, or the sale of securities and assets.

Make adjustments

Once you’ve compared the numbers and located where improvements could be made, take action. 

Let’s go back to the improving cash flow example. 

Say you notice overspending when comparing the expense report to your budget. Pinpoint exactly where you can make an adjustment to get your spending back on track, then make the change.

Here, in this instance, you may consider eliminating in-office staff in favor of software and other back-office automation tools to reduce expenditures. You might try to increase the quality of certain products and/or services you provide. This way, your business can boost revenue by attracting a higher income bracket of customers who are searching for ways to showcase a more expensive standard of living.

Other issues you may contend with within the adjustments process include:

  • Unreconciled accounting processes
  • Unaccounted for expenses
  • Lack of budgeting
  • Untracked cash flow
  • Lack of distinct business and personal financial accounts
  • Bad lending practices, including over-borrowing
  • Muddled financial forecasting

Here is where having qualified experts who are trained in certain areas like accounting will greatly improve your business practices.

Work with a trusted accounting partner

Data-based decisions can take your business to the next level, but you have to implement a good system to get the most out of it. Working with a trusted accounting partner, like creditte, will ensure you are setting strong and achievable goals. You get the tools you need for tracking the right metrics, running meaningful comparative analyses, and making adjustments to get your business where you want it to be.

Learn how creditte can help you by visiting our website today.

Start building a better business with better numbers

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