Move from gut-based to data-driven business finance

In the early stages of any business, many decisions are often made based on intuition. However your business will evolve, it will expand and the finance function becomes more central to the business strategy. It is then essential to transition from a leadership style that relies on vague gut feelings to a data-driven approach.

The UK has a troubling statistic where six out of 10 startups fail within the first three years. Among those businesses that fail, 29% attribute their failure to running out of cash. To improve the entrepreneurial health of the country, it is crucial for businesses to take control of their finances. One big aspect of this is to use accurate financial data for better decision-making, ultimately increasing their chances of success.

We have worked with finance directors who have applied this principle, frequently aligning it with replacing other business systems. They usually see this as an opportunity to transition to a cloud-based solution to offer more functionality at the same time.

In other words a finance team’s automation journey becomes part of a company’s broader digital transformation from a traditional business to a digital business. As the business’s IT infrastructure transitioned to a cloud-based approach, the finance transformation needed to occur as well.

Today businesses usually generate revenue from various income streams and diverse opportunities. Consequently, business look for an all-in-one solution that included consolidation and multi-dimensional analysis capabilities, enabling teams to generate reports, examining revenues and trends by sector, product, distribution channel, brand, and department.

Efficient consolidation and reporting are crucial for group VAT reporting under Making Tax Digital (MTD). Before implementing AccountsIQ, NS Media relied on Excel bridging software to submit quarterly updates.

How does data-driven business finance support key business goals?

To achieve business growth, there are only three meaningful ways that are well-established business principles:

  • Increase the number of customers
  • Increase the transaction size
  • Increase the purchasing frequency

To ensure the company’s business strategy is sound, it must adopt one of three methodologies. However, achieving fast and stable growth requires proper data and guidance from the finance function, regardless of which route is chosen.

This growth could occur from expanding a customer base by introducing new products and increasing subscriptions. It could come from increasing transaction size by transitioning to a renewals-based offering, and investing in top-quality content. By adopting a Financial Management Solution (FMS), like Zoho Finance Plus for example, you can automate your finance system. Furthermore, you can optimise resources and achieve efficiencies as it shifts your focus from processing transactions to supporting business processes.

What can business systems do to move you towards data-driven business finance

Today, a holistic approach which features many customisations, integrations and supports numerous sales and client management processes can easily be adopted across any enterprise. Integrating new data streams into the FMS provides the finance team with greater control over the accounts receivable process from start to finish. For example, when you invoice from Zoho CRM, almost instantaneously, it’s in Zoho Books, and you can begin the collection process. All of the data in the accounts receivable link up to the FMS and that automatically sends proactive emails to clients to assist in the collection of invoices. This results in quicker invoice payments and significant time savings on accounts receivable tasks.

You can take this further and implement an online approvals workflow that enhances accountability for managers while enabling them to approve expenses on the move as they arise, thanks to additional integrations. You can become much more efficient, and have more time to dedicate to activities that add greater value to the business. Tasks that used to be laborious, manual processes, such as VAT and expenses, can now be completed in 5-10 minutes, freeing up time and resources for more valuable pursuits.

All of these automated processes are linked back to the accounts system. This provides the finance team with better visibility and clear audit trails that allow them to trace the source of variances or other anomalies in the ledgers.

The benefits of data-driven business finance

We have observed that the integrated finance approach delivers practical advantages such as enhanced internal efficiencies, cost savings, better collections and cash flow. However, transitioning from tactical enhancements to strategic advancements can considerably amplify the return on investment. According to many, features such as workflow approval offer the finance team greater control. It allows them to evolve and make more significant contributions to the overall value and strategic objectives of the business.

Our experience with multiple clients demonstrate how an integrated FMS can help the finance team:

  • Transform from a transactional role to an analytical one. Where finance managers go beyond supervising data input and develop expertise in identifying significant insights from the data. Rather than just extracting data, they shift their focus to uncovering the valuable diamonds hidden within it.
  • As a financial team, your analysis, advice, and consultation can be of immense value to the executive team. By creating customised reports, monitoring key metrics, and generating forecasts, you can provide valuable insights to inform decision-making.
  • By leading the thought process and developing strategic and tactical plans for the business, you can help your team make informed decisions. Decisions based on data rather than emotions. Using hard data to identify potential financial risks and evaluate new business opportunities enables your team to proactively address challenges and make sensible assessments to drive growth.

In conclusion

We have seen a trend in businesses in all industries. Those that increased control and confidence in their data saw them being able to efficiently identify areas for revenue growth and cost control. As a result, they have transformed into a strategic, data-driven function, providing more accurate and dependable forecasting. They now analyse their performance and identify growth drivers to gain insights into the business’s trajectory. Their board relies on their forecasts and modelling to inform strategic decision-making, assessing the affordability and profitability of future plans.

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