How Can Your Small Business Start Using Analytics With Your Financial Accounting System?
Data analytics is a huge deal right now, and most small- and medium-sized businesses (SMBs) agree that delving deeper into their own financial accounting business information is a requirement for success.
The good news is that although most SMBs don’t have significant resources to dedicate to mining Big Data, they can get more insight out of the data they already have without specifically paying for this kind of effort.
The need for improved business analytics is one of the primary drivers that SMBs consider when upgrading their enterprise resource planning (ERP) financial accounting software. QuickBooks and spreadsheet systems work great for a while, but they aren’t powerful enough to provide the insight and business intelligence that most companies need to stay ahead of the competition in today’s landscape.
In addition to a general need for more and better information, there seem to be two specific business scenarios that drive companies to invest in new financial accounting software, and thus small-scale analytics capabilities.
For starters, growing SMBs frequently have two or three companies they’re managing. Often, each of these companies uses QuickBooks, which means the parent company may have three separate sets of QuickBooks to manage.
The companies in this scenario can’t consolidate the data quickly or efficiently enough to perform timely analysis. Remember, without advanced software, consolidation can only occur by exporting the data to Excel, and then merging the companies’ data into a giant spreadsheet. This process can take hours, even days, just to get the information in one location.
The second most common reason that SMBs need analytics is that they’re operating multiple types of applications to help run their businesses, and none of these programs are compatible with each other.
In today’s world, most business applications needed to run a company are siloed. For example, if a company were running Salesforce.com as its customer relationship management (CRM) solution, or using Excel or a database to keep track of customer information, then to manage its accounting efforts it might use QuickBooks or some other kind of spreadsheet system. Finally, if it were selling products online, it might run an e-commerce solution to manage the effort.
Suddenly, a company has three independent applications to keep financial data, and none of these programs can talk to each other.
Many SMBs may take in as much as $1.5 million annually, but by running all these incompatible applications, they’re missing opportunities. They have no ability to analyze customer data in terms of billing, e-commerce, inventory or a hundred other indicators. Essentially, they’re flying blind. They have multiple applications keeping the business afloat, sure, but they can’t actually view the data and make strategic decisions about the future.
This is a huge loss for companies. Performing analytics on their financial data — including closes and trends — is where they’ll discover their best value and greatest insights.
So how does a small business begin to incorporate analytics? Assuming it has a powerful financial accounting system, where should it start?
First, financial data should be the anchor of a company’s analytics efforts. Financials contain the most important customer data, including receivables. They house contact information, billing, purchase orders and everything related to how a company interacts with its customers. This kind of data is in an accounting system. In other words, the most important first step for quality analytics is to invest in a quality accounting system.
Second, be sure to incorporate and analyze customer information by purchasing a CRM system that salespeople will actually use. Unfortunately, most companies won’t use their CRM system to facilitate business transactions and so salespeople aren’t inclined to really get the most out of the application.
To find one that will actually benefit the company, compile a list of the information or key performance indicators (KPIs) that will drive success in the business. What does that data look like — is it customer or inventory data?
Next, identify the location of the data that you’re trying to access. Is it housed in one financial application or in multiple applications? Is all the data in a separate system or just a spreadsheet? Is the business built around an e-commerce billing system? Where’s the data today?
Once you know the information you need and where the data’s located, figure out how to get the information out. Remember, if your company is running QuickBooks or just using spreadsheets, it’ll be difficult and time-consuming. It’s better to find a system that can better provide access to the needed data.
Performing data analytics is one of the most important things that an SMB can do. And fortunately, investing in Big Data isn’t a requirement to collect quality insights from the data the company’s already generating. The key is to invest in a quality financial accounting system.