Every business — no matter what the industry or field — eventually comes down to bottom-lines and profit margins. No matter how great a product or cause you might create and represent, it does no good if you can’t keep your doors open. That’s where financial data analysis tips for beginners and experienced business people comes into play.
Financial data analysis is literally the process of reviewing and analyzing a company’s financial statements in an effort to make the business more economically efficient and ultimately more profitable. However, understanding financial ratios and determining business valuation can be complicated and difficult processes.
Luckily, help is out there. Here are just a few of the reasons why an investment in financial data analysis is a good business decision.
- You Don’t Know What You Don’t Know: It might be a bit cliche, but it’s the truth. Even the best, most intelligent people in business aren’t necessarily experts at financial data analysis. In fact, most people become leaders in their industry because they’re experts at whatever it is they create, produce, sell, or service. Not because they can read numbers and predict outcomes. Overall, “incompetence” is the reason why almost half (46%) of businesses fail. Not because they don’t understand their industry, but rather intricacies like pricing, record-keeping, tax mistakes etc.
- Small Inefficiencies Add Up Fast: Take care of the little things or they’ll wind up becoming big problems. Just like putting off maintenance on a furnace or vehicle will typically result in more serious damage in the long run, the same can be said for financial data analysis. Your business might be running fine today, but that doesn’t mean there aren’t a variety of potential issues bubbling right below the surface.
- Not Just for New Businesses: Many people assume this sort of assistance is meant for new companies who are just getting started, but in reality, any business can hit a downturn quickly. Sure, approximately 25% of businesses fail in their first year, but 36% fail in their second, 44% by the third, and at the end of four years 50% of businesses ultimately fail. Some would even argue that professional help with data only increases as your business grows and more numbers/variables are added to the mix.
As a CEO, president, or manager of a company, your time is best served handling the day-to-day business operations that really make your business tick. Financial data analysis is a crucial piece of the pie, but one that’s best left to the professionals in that industry.