Most businesses are good at keeping track of their financial data. They make a record of money as it comes in and as it goes out. Whether a company has a part-time accountant or a team of financial wizards, it is important to use financial data when making business decisions.
Collect Financial Information
If you haven’t looked at your accounting system in a while, now is a good time to do a review. Are you gathering all the necessary information from each transaction that is made? Do you have a streamlined process for both accounts receivable and accounts payable? Is your system able to provide you with timely information? You want to have a way to see what is happening and how it is impacting your company overall. Using a record to report system can make that process much easier.
Validate the Data
If it has been a while since you audited your accounting system, now might be a good time to do that. You want to be sure that all information is entered into your system correctly and verify that it is accurate. With an R2R system, you will have a specific method for recording transactions so that everything is done exactly the same way every time. That leaves no room for small errors to creep in. It also makes it much easier to sort and report information.
You want to be sure that everything attached to a company’s financial accounts is included and recorded. Whether it is your payroll or a small purchase for the break room that you think doesn’t really matter, you need a full record of expenditures and income. Accuracy is the key to trusting in your bottom line.
Making sure that bank and other financial statements are reconciled within a few days of the statement date is critical. You don’t want to be stuck needing to reconcile a year’s worth of statements at tax time!
Create Helpful Reports
No matter what type of accounting software you use, you need to be able to run some kind of report. Otherwise, all that data you have collected and stored is just sitting there doing nothing. You don’t want information that has the potential to help you improve your business to be untapped.
You need to determine what types of reports you want to run and the kinds of information that you want to see. Decide whether it is more helpful to see your income on a daily, weekly, or monthly basis. Perhaps you want to look at your expenditures more often than monthly, or maybe you prefer to check on them quarterly. You have a gold mine of data, so figuring out how to display it can help you determine so much more than whether or not you have a net income or net loss.
Use the Information To Make Savvy Business Decisions
Your finances can be used to inform nearly all of your business decisions. If you have accurate records of all kinds, you can use them to help you with manufacturing products, marketing and sales. Don’t go into meetings unprepared. Take the data you need to back up your ideas and to assist you in coming to solid decisions.
Schedule regular meetings where current reports are reviewed. If you see trends from one month to the next, you can look for anomalies that may stand out. You may see that there are both good and bad trends. If you are reviewing your reports regularly, you can make strategic changes more quickly to respond to issues that you find.
Take the time to look at historical data so you can make predictions about current and future expectations. Perhaps you will find that in certain months, your income is much higher than expenditures, or vice versa. Taking note of that type of data can help you make decisions that flatten out the expenditure curve or that improve the income curve.
As you can see, it is important to keep accurate financial records and use your data through helpful reports. This can help you stay on top of what’s happening so you can grow your business.