Entrepreneurs don’t have to be fully versed in translating accounting spreadsheets and financial statements to run a successful business. However, they must understand and use financial information to make sound business decisions. Having an accountant or bookkeeper who develops a working relationship with your financial data and acts as a trusted advisor can mean the difference between watching your business grow strong and steady or going down the path of no return when it becomes too late to correct your course. A great relationship with financial data is empowering and crucial to helping you make more strategic goals, commitments and progress.

Plan for the Future

Getting people on board with your business idea is a large part of the job of an entrepreneur. Setting goals requires an understanding of financial and operational data. By making quantitative goals, not only do you have measurable proof points for your investors, but they are motivators to yourself and those who work with you or for you.

This data can also help you set qualitative goals and motivate your team. Having the right accountant or bookkeeper on your side who provides these insights can help you set future goals. The factor that makes this piece of the relationship successful is the ability of the business owner to link this data to real-world situations.

Make More Informed Commitments

There are three common pain points that keep small business owners up at night:

Cash flow and how much money is coming into and leaving the business
Accounts payable questions or who do I owe money to
Accounts receivable questions and who owes me money

Understanding your financials and the calculations provided to you by your accountant or your accounting software can resolve these pain points and help you make more effective time, energy and money commitments to attract customers and deliver goods and services at a larger and more efficient scale. It is vital to track and understand these pieces of your financial landscape as all these promises impact your small business's growth rate and stability.

Commit to Continued Progress

All the pieces above combined will help you measure and reassess your progress so you can reward and encourage profitable behaviours, report progress to third parties, and revise your business decisions if necessary. Staying on top of your analytics is important, as measuring the predictions you made earlier and comparing them to your progress helps keep you transparent and on track.

This creates an accountability factor in your relationship with your accounting data—measuring trends in revenue can help you gain and exploit opportunities down the road. Understanding the areas that may not be so productive becomes easier because you’ve likely caught the bottleneck early enough that it can be corrected before it poses a real threat to your business.

Strategize on the Benefits of Technology

As a small business owner, it is important to understand and converse with your financial data instead of fearing it. You are time-constrained and likely on the go for most of the day, with a busy schedule and competing priorities. Having a trusted advisor who empowers you and ensures you have the tools to be agile in making strategic business decisions will ease this predicament.

As an entrepreneur, you need to look at your financial data at a granular level to understand what is selling, what’s not, expense details, etc. It’s important to have an advisor you trust on your side who can help you see the bigger picture and find the devil in the details. This advisor can help you understand how to plan for the future, make informed commitments, commit to progress, and strategize on the benefits of technology.

How to Become a Data-Driven Business

Small business owners have access to more data, analytics and technology than ever. With technology constantly offering new ways to manage your business faster, easier, and on the go, it’s possible to use this new digital data we’re creating to improve business operations. But many small business owners aren't taking full advantage of their data.

Sometimes we meet business owners who don’t know how to generate the kind of meaningful data they need. But more and more frequently, we’re seeing business owners who have so much data that they aren’t sure what data to use, and how to harness it for growth.

Learn how you can begin transforming your business into a data-driven organization, and what it will mean for the growth of your business.

What does it mean to be a data-driven business?

Being a data-driven business means that your company uses hard data and facts to drive their decision-making processes. This may sound obvious, but a lot of businesses still make decisions based on assumptions and opinions, or worse—based on incorrect data.

A lot of organizations have data available, but aren’t making use of it during important decision making. Being data-driven is more than simply skimming your stats when you have a spare moment. It means committing to using your data reports to understand, manage and grow your business. And it starts with you, the business owner. For your business to truly become data-driven, it needs to become a full cultural shift that you instil in your entire team, whether it’s you and a couple of contractors, or a growing staff of 100+.

Find Balance

First, take an inventory of your current data and analytics sources. When you’re first getting started, it’s important not to overwhelm yourself and your team with too much information. Start small, and then continue to look for new data that helps you fill in the gaps.

Being data-driven is not about absorbing as much data as possible—it’s about finding the data that works for you, for your company’s unique goals, and for your growth plans.

Streamline Your Data

It’s important to cross-reference your data and look at the big picture. If you’re looking at your company’s online presence and marketing data (social analytics, web traffic, etc.) but not cross-referencing that with your financial data, you won’t be achieving a clear view of how your company’s marketing is working for you.

Whenever possible, integrate the software and apps you use to collect information. When your data works together, you’ll understand your business more easily. Xero for financial analytics offers a wide variety of app integrations and analytics options that allow you to manage payment processing, inventory, time tracking and reporting—making it easy to understand how the different elements of your business impact your bottom line.

Focus on Your End Goal

For most companies, becoming “data-driven” is not a key objective for the year. Your end goals will usually relate to your plans for growth or your financial bottom line. Clarify your business’ end goals, and then work backwards to find ways your organization can use data to meet them.

For simplicity’s sake, let’s say your end goal is to have revenue of $1,000,000 this calendar year. You can use your financial data to calculate how many new clients you’ll need to gain to meet that goal. Next, you can analyze your Google Analytics, Google Search Console, social media, and other marketing reports to see how many clients you’re growing each year. You can then work backward to create a business and marketing plan to meet your year-end goal.

Bring in New Eyes

Managing a data-driven business makes it easier to continue sourcing meaningful advice from your strategic partners and business advisors. If you can walk into a meeting with your company’s full financial information on hand, advisors will find it quicker and easier to guide you than if you walk in with a story and some disconnected numbers.

Six Steps to Becoming a Data-Driven Business

1. Embrace Technology

Technology is essential for virtually every company in the modern era, regardless of size or industry. As technological solutions evolve, companies can collect data in more ways and from more sources, leading to a significantly larger pool from which to learn. Employing the right solutions, be it bookkeeping, website analytics, time tracking, or other opportunities, can put information at your fingertips.

As you use more technology in business, be sure your team members are prepared to fully participate. Even if some employees are reluctant to leave behind old, outdated ways of doing things, your organization's culture needs to shift toward an inclusive data collection and use approach.

2. Develop a Strategy

Employing the tools to collect data is a good start, but a large pool of numbers and transactions can only tell you so much. In order to make the most out of data, it's important to have a strategy in place that can highlight what you're trying to achieve and which metrics can help you along the way.

Before you dive in, set a strategy based on corporate objectives. If, for example, you are hoping to increase sales by 20% over the next quarter, your plans should center on what is required to achieve this. By posing questions relevant to your overall goals – "how much marketing spend is required to increase awareness in a way that will boost sales?" – you will be better positioned to search for actionable answers.

3. Identify, Collect, and Verify Data

Once you've asked the questions relevant to your key business objectives, it's time to find solutions. First, you need to identify what kinds of data are most beneficial to your mission. If you're trying to increase sales, you may want to look at the effectiveness of marketing methods and trends in transactions. Data collection can differ greatly – transactional details can come from your bookkeeping process, while Google Analytics may be more beneficial for digital marketing – so be sure to explore all options available to you.

Before starting any kind of analysis, take time to ensure all numbers and metrics are correct. If necessary, you may need to consider other sources to ensure meaningful results.

4. Data Analysis and KPI Visualization

Once you have the numbers you need, it's time to put them to use. After ensuring your data is relevant, accurate, and thorough, you can determine what you'd like to explore, like marketing ROI or sales trends in specific product categories.

Analysis is easiest using business intelligence tools, like Power BI, Tableau, or Klipfolio, to categorize and present data in a less manual manner. Assuming your data is properly organized, generating graphs, charts, and dashboards can be managed in a few simple clicks, providing both high level and in-depth looks at your chosen metrics. The creation of visuals can be invaluable in the review process, offering a way to identify clear trends and highlight important information, even without a background in financial or data analysis.

5. Convert Insights into Action

Identifying and analyzing trends is a good start, but it means nothing if you can't apply what you have learned. Once you determine patterns, red flags, and business drivers, it's time to turn insights into action.

Instead of sitting on your new-found wealth of information, present and distribute reporting outlining your findings to organizational leadership. How you share information matters, so be sure the data you provide is organized and targeted toward the changes necessary to improve business outcomes.

6. Refine and Improve Practices

Data analysis doesn't stop after one discovery. Instead, utilization of data should be a part of every decision-making process. In many cases, this means continued study and education to refine practices, improve accuracy, and strengthen your skills. Becoming a data-driven business won't happen overnight, but the more effort you and your team put in, the easier it will be to optimize day to day operations in a beneficial way.

Taking the first steps into business intelligence may seem overwhelming, but the advantages are well worth it. From accounting analytics to sales statistics, there are plenty of ways to collect, aggregate, and apply meaningful information.

If you are considering a data-driven approach to your business, Enkel can help you move forward with confidence. Contact us today to learn more about our accounting and data analytics services.

How We Select and Evaluate Our Recommended Software

We thoroughly research and test the apps we include in our regular workflow for Client bookkeeping services. After deciding on criteria for evaluating the software and then researching the app itself, we tested the app, noting its strengths and weaknesses. We then work with the app for at least a few weeks before deciding whether to recommend it to our readers. We use the software as it was designed for its intended tasks. For a detailed walk-through of how we select and evaluate software, please see the details of our process.

Accounting Data in a Small Business Context