Financial records and accounting reports are what tell you the story of how your company is doing financially, which is why accounting is often referred to as the language of business. By following daily, weekly, and monthly procedures, your accountant or bookkeeper is recording data that can be tracked. It’s this data that forms the basis of your business’s financial communication and it’s what enables business owners to make better decisions. 

Analytics tools and business goals

There are excellent analytical tools you can use to track your company’s health, such as Xero for cloud-based accounting, but before you set these up, deciding what to track is key. Most companies don’t spend enough time considering this, which is why in many cases, analytics fail to produce the results you want. 

The process begins with setting clear, quantifiable business goals, such as increasing revenue by 10%, or increasing lead conversion by 30%. Once you’ve determined your business goals, you can create your key performance indicators (KPIs) to track progress towards your goals.

Your financial KPIs will be based on your revenue, expenses, profits, capital, and cash flow, each providing in-depth insight into your business’s financial status. 

Why is financial reporting so important?

In addition to the all-important snapshot that reporting tools give you to keep you informed of your activities and your business’s financial health, they also help you to: 

• Improve debt management by giving you up-to-date information on receivables, as well as the ability to track your liquidity. 
• Identify past and present trends. This enables you to identify strengths but also quickly take action to mitigate problems arising from weaknesses. 
• Ensure you and your accountant can simultaneously track data in real-time. The benefit? You can make accurate, informed decisions fast while avoiding pitfalls and maintaining your financial fluidity. 
• Determine what you need to do, such as reducing existing liabilities, when you’re considering applying for a business loan. Your financial reporting can help you explore your data to make informed decisions. 
• Improve your financial efficiency and ensure you remain 100% compliant. This is thanks to the accuracy and robustness of the software you use for your reporting. 
• Work with your KPIs to drill down into your cash flow to see anticipated profits and liabilities. The benefit is consistent liquidity. 
• Respond quickly to challenges and improve internal communication. When your team understands your goals and can share vital data, your business will become more efficient and innovative. 

Considering the importance of financial data, are you doing enough to give you the peace of mind to make informed decisions for your business’ growth? And, do you have the time you need to spend on value-adding projects, or are you manually creating reports that don’t give you the insights you need?