Most business owners I come across have developed systems to control their finance – invoicing, payments and payroll. The emphasis here is on control, and in doing so misses the bigger opportunity for financial information and analysis to aid decision-making.
Financial management information is more than the ‘management accounts’, it’s the deeper analysis that spots trends, identifies problems, helps to discover solutions and forecasts different outcomes. Management information does not require a Management Information System (MIS), or a great deal of expense. It requires a rigorous approach to business data collection and modelling, together with the application of a few useful business benchmarks, indicators and tools.
Over the next few blogs I’m going to be asking – ‘Do you know?’ – highlighting a few important business finance health indicators that form the basis of financial management information package that can give you the insight you need for successful business decision making. The questions include:
1. Do you know: your defence interval?
2. Do you know: where you’re making the most money?
3. Do you know: the % contribution by customer?
4. Do you know: your average payment terms?
5. Do you know: if you’re paying suppliers faster than customers pay you?
6. Do you know: how you would get more money if you needed it?
7. Do you know: if technology is a help or a hindrance to your business process?
If you are unable to answer the ‘Do you know?’ questions, then it could be time to overhaul your financial management information to open the way for clearer insight and better informed business decisions.