Are you having trouble with tracking your money and building your business? Are you a church leader who is lost in managing the resources of your church? I bet you have money coming in to your organization and maybe the same amount leaving, possibly more than what is coming in, which means your resources, your savings, and your future is leaving also.
After I had arrived to work on the Army Staff at the Pentagon in Washington, D.C., I knew this assignment was going to be different from everything I had done before. We were going to look at everything from a strategic view, and we were going to look at what the data said before we made a decision. By looking at the data, you can eliminate guessing. By collecting, analyzing, and modeling data, your decisions about resources and policy can be better linked to your strategy; your performance and outcomes have an improved chance over time to meet projections. At the least, you may be able to eliminate the statistical noise that you can control.
Here are the requirements for you to start planning and using data in your organization to gain insights and develop your competitive advantage:
1) Develop a Finance Strategy: Your finance strategy must link to your business strategy. It includes projected costs and revenues and an analysis of your competitors. It answers the questions about how you will finance your operations, how you will deal with your competitors, how much you will invest back into your business, and how much revenue is expected to be earned? If you don’t have your business strategy, your finance strategy will not make sense. Additionally, if you have a business strategy, but do not strategically plan your finances, then you will be lost. Apart from your accounting responsibilities, planning and analyzing your financial activities (non-accounting related data) to compare your goals and projections against your performance will improve your chance of success.
2) Publish Financial Statements: Financial statements provide a health meter for your organization. In order to produce financial statements, you must have an accounting system that tracks your revenues, expenses, assets and liabilities into manageable accounts. These financials provide a measure of whether you are making money or losing money. Every period you must produce a Profit and Loss Statement, a Balance Sheet, and a Cash Flow Statement, at a minimum. In later discussions, I will address cost accounting a little further so that you can figure out how much something costs. Spending money is not the same as what something costs. Costs can be further and deeper analyzed, and then grouped and re-grouped. For example, if you build custom motorcycles, you most likely charge by the job and quite possibly you are not applying all of the expenses to each job. More on this later.
3) Know Your Customers: You must be able to predict your customer’s behavior (at least come close to predicting their behavior) and in order to do that; you must gather information on what your customers are doing. This can save you labor and help you concentrate your efforts where your customers are most likely to interact and buy your products and services. Do you know what day of the week your sales are best? What about which hour of the day? What are they buying? What are they clicking on and when do they enter your brick and mortar store? What are their demographics? Who is your customer? If you know this, you can make better decisions with your marketing, sales, and chart labor planning.
4) Embrace Analytics: Analytics is the science of finding applicable patterns and relationships in data and experimentation. The goal is to predict behavior and outcomes based on a statistical and financial analysis. You may not know yet what types of data to collect, but once you experiment with some customer buying and interaction data, you may be able to find an insight on behavior that you can use to change how you market your products. Additionally, if you deep dive into your costs and expenses, you should be able to find ways to be more efficient. A reminder though: whatever you collect on your customers must be ethical and legal. Always protect the privacy of your customer and secure your data to protect them.
Knowing your numbers helps you to plan and roadmap where your money is going and if it is being spent and resourced according to your strategy. When you record your transactions and collect the right data on your customers, you can gain insights that may give you a competitive advantage.
Do you have a finance strategy for your business and are you using analytics to improve your decisions? How are you doing it? Please send me a comment at comment@stephenmclain.com.
Copyright-2016 Stephen McLain