How can you interpret data to inform business decisions?
Handling and interpreting data can be disconcerting, especially if you do not have a clear idea of what you would like to achieve from the analysis.
Before even considering data interpretation, you must ask yourself whether you are getting the right information from your accounts system.
Particularly for businesses with an array of sectors, there is a range of data that you could be collecting, therefore you must recognise whether your current accounts system assist you to run your business and make informed management decisions.
If the answer to this question is no, you should re-evaluate how you use your cloud accounting software, rather than trying to extract data that is not of value to you.
At this stage, it is important to take a step back and assess which of your business targets are measurable. In turn, this can help to identify the data sets that you would need to be able to make effective decisions.
Once you have established the insight that you would like to gain from the data, the process of extracting the key information you require is simplified.
For instance, if you have identified increasing profit margins as one of your business objectives, you can recognise that you require information on your current profits, such as cost per unit and revenue per unit, along with the total sales at the current price.
Obtain the data
For obtaining the data, it may be necessary to rethink your use of cloud accounting software to ensure you can extract the data that you need to inform your decisions.
In the circumstance that you need to add more apps to perform the analyses you need, you can find more information on choosing the best apps for your business in our previous blog.
Having the relevant apps in place means that you can easily obtain the necessary data, making the comparison process easier.
Compare data and implement necessary changes
With the data readily available you can begin to interpret this, in line with the aforementioned business goals.
To get a clear idea of how your business is currently operating, it is useful to monitor the current status of the relevant KPIs alongside the figures from another period, which could be monthly, quarterly or annually.
This method of analysis can help to recognise potentials areas for improvement thereby informing of any changes you should implement.
As part of the analysis, you should regularly review your progress to make any further required alterations to your business’ operations.
Do not get too distracted by KPIs
Whilst measuring KPIs provide insight into how your business is performing, you must not see these as targets to be hit.
Focusing too much energy onto one KPIs could come at the detriment of other business areas, therefore it may be useful to repeat this process for multiple business goals.
Do you require more in-depth advice on interpreting data? Contact our experts today.