Data-driven decision management is the state of the art in business management. The most efficient businesses are run by owners and managers who make decisions based on the data that their businesses generate rather than based on hunches or ideas about why their business performs the way that it does. According to the MIT Center for Global Business, companies that use data-driven decision management are 4% more productive and 6% more profitable.
Upgraded accounting is a prerequisite for data-driven decision management. A business owner can’t use data that they don’t have; upgraded accounting gives you a clear window into where your business spends money and where revenues come from.
Upgrading your accounting can provide more precise data about revenues. Does most of your business’ revenue come from just one or two customers, or one or two types of customers? Perhaps you can manage them better. Upgraded accounting can help you to identify the customers that provide you the most profit for the least effort as well as those that provide the least.
Did the marketing plan that you initiated six months ago to attract customers from other industries generate revenues or just phone calls? Upgraded accounting can help you to track the effects that your marketing dollars generate. Many businesses track the value of their marketing efforts by tracking call-backs or customer contacts. Upgraded accounting can help you track what really matters: revenue. With more and better information, you can make more rational decisions about future marketing efforts.
Are your highest-grossing products the same as your most profitable products? Upgraded accounting can provide the data necessary to understand which products produce the most profit for the least effort. Many businesses find that they spend too much time on a product or process that has become unprofitable and too little time on the products that drive the bottom line. Data-based decision management can help you make rational decisions when it is time to retire an old product or introduce a new one.
Most businesses have a rough idea of their seasonality. Retailers expect more business during the holidays and water parks expect more customers during the summer. Upgraded accounting can help you to identify stealth seasonality trends, such as more customers coming to your door on Wednesday afternoon or a consistent rush of retail customers during the final hour that you are open. Data from upgraded accounting can help you to assign staff to the busiest and most profitable periods or adjust your operating hours to capture the times that customers want the most.
Upgraded accounting can help you to answer questions about product profitability, effectiveness of resources, seasonality and more. This additional information can help you to make rational, data-based management decisions. This, in turn, can make your business more profitable.
Upgraded accounting can also help you at tax time. Knowing exactly where your business spends money can help you and your tax preparer to make the most of IRS deductions and tax credits. The IRS recently changed the rules on deduction of small capital improvements. In the past, businesses had to determine whether an improvement would last more than a year in order to decide whether it would generate an immediate deduction or was a cost that must be capitalized. Today, businesses can immediately deduct the cost of equipment and tangible improvements which cost under $2500. Upgraded accounting can help you and your accountant make the most of this and other new tax rules.
Upgraded accounting helps to provide you with the data that you need to make rational decisions about your business. If you want to learn about upgrading your accounting, please contact us.