Do you use your own data to keep your business on track?
We know businesses earning half of what they were this time last year - and they are doing something positive about reversing this trend. These businesses believe that living in challenging times is no excuse for not having a strategy for growth.
Successful businesses constantly recalibrate their products and services and seek other income streams. They target only a receptive audience. They don't all have massive reserves or extensive R&D resources to call upon. Instead, they all access something freely available and close to home - a reliable means of understanding where to take their business and how to act. Quite simply, they rely on their own data taken directly from their accounts and other areas of their business. 'Use your own data to keep your business on track' is what every accountant should be telling their clients because it is the single, most reliable source that can tell you how to improve.
Don't let austerity keep you from trading successfully
Many businesses have been through 2 recessions (3 since the early 80s) and now we may be on the brink of our 4th, this time a UK / Brexit focused one.
We've spent the last decade tightening our belts, living through government-induced austerity measures and tightening regulations – increase in personal taxation, health & safety, GDPR, anti-money laundering, etc. The signs of stress are very apparent in the state of the nation’s 'health'.
So it seems increasingly difficult to stay afloat let alone grow. But if our businesses were people we'd be looking to simplify their lives and reduce stress levels. Seems like a plan! And it all starts with the data you hold in your management accounts - very specific data on what you deliver, to whom and how. Focus on this because this is your starting point for tightening up your structure and planning your future development.
For example, if you are running a personnel-based business, such as a temp agency or care staff provider, you'll want your hourly charge-out rate to cover all your costs not just the wage you pay out. We work with our clients to improve their profit margin without impacting on staff or cutting costs. We do this simply by studying their numbers.
The old fashioned view is that your accounts are just for HMRC. Together with key business data, your numbers are in fact the very lifeblood of your business.
Top 3 excuses why businesses ignore their own data
Use your own data to keep your business on track, we say. But we hear 3 excuses:
- Don't have the time or money
- Don't have the skills
- Don't see the point
If we examine them in reverse order, they start to cancel themselves out:
Don't see the point
In some cases this is code for 'Don't want to know, don't want an NHS debt-sized fright'. Your data may indeed tell you some unpalatable truths such as you're losing customers or discounting too much. Equally likely it'll tell you something positive like you've been ignoring a valuable customer base or tying up your money in too much stock. Either way you can work with this intel and improve. Don't file your accounts away; dig that bit deeper and find out what's really going on. Facing the truth can be liberating rather than debilitating.
Don't have the skills
You're probably already making decisions based on seasonal trends and movements in your industry so reading data isn't alien to you. Most of your bookkeeping can be automated so that you can also have real time financial and non-financial data on demand. Where you may lack expertise is how to get the maximum value out of your own data - and that's where your accountant comes in because we make sense of data all the time. Being a 'non-numbers' kind of person doesn't mean you can't use your own data to keep your business on track.
Don't have the time or money
Can you afford not to find the resource to improve your business? One of the things I often hear business owner’s say is that they are too busy running a business with tight resources and a lot of red tape. The reality is, if you want to keep trading and steadily increase your revenue, you have to invest in the necessary resources. For example: embracing fully all that the digital world has to offer (ie cloud accounting and artificial intelligence so your numbers are reliable, secure and always to hand) and relying on a network of trusted, proactive advisors to help you focus on what matters. Get someone else to be the numbers person - your job is to make decisions based on the intel you receive.
This is what your data can tell you
Businesses have different uses for their data based on very different needs. Here are 3 examples of how we help clients put their data to good use.
Example 1: The eBay/Amazon Retailer
Competition for selling goods is very high so margins are tight in retailing. The question is, do you buy stock in bulk and get larger discounts, taking on the risk of your cash doing nothing as 'sitting' stock? Or, do you sell and then buy goods using trusted suppliers local to you? You may employ a combination of both these tactics but how do you get the balance right? For example, do you sell stock in bulk to Amazon directly for resell where margins become tighter but at least you release the cash from the stock? The only way you can make such informed decisions is to know your stock, the margins and selling history - your data in other words. Then you are in a better position to act on what market trends are also telling you.
Example 2: The (Domiciliary) Care Home
This is an industry where underfunding is legendary and thus a major challenge for most care homes and domiciliary (general and complex) care providers. The care packages they provide must be carefully tailored to each individual client while ensuring that all costs (not just labour) are covered within an hourly rate. Beside the basic labour costs are NI, recruitment, compliance, training and any overheads. So the hourly rate is critical - get it wrong and you risk giving substandard care or not covering your costs. Again, a review of historical client care information is invaluable when costing a new client package. In our experience, if these package costs are reasonable and valid, they will be acceptable to the commissioners.
Example 3: The Fast Food Outlet
The big questions for a fast food business is how do they know what's trending, what to buy and how much so they keep their customers happy while retaining a healthy profit margin? They certainly don't guess - not if they're our clients they don't. They factor in elements such as wastage and what sells best in their specific areas, whether meal deals alter customers' behaviour in a good way. This data is readily available to them - on a daily, weekly, monthly basis and we help them use it. We help them understand their customers so they can do more business with them.
Keep your cash flowing in the right direction
It shouldn't surprise you to learn that many businesses have money set aside. Hard graft over a number of years means they have a healthy cash flow. However, like water, cash can stagnate - it loses its value if it doesn't keep flowing. Invest it - in property or business expansion. But keep to what you know. Diversify the business into an area you already access through someone else's (maybe poor) services. And do it better.
Take me to the data
Your business data (financial and non-financial) leaves a trail - it provides a narrative. The basic elements are wrapped up in your management accounts - profit and loss, balance sheet, key performance indicators, etc, etc. The more detailed the information available within your management and accounting system the better the analysis and the more confident your decision-making. You need your data to help you write a business plan and support your need for funding so let it help you run and grow your business. Use your own data to keep your business on track.