Let’s take a trip down memory lane and revisit your grade school-self. Remember when you were taught the scientific method and you were supposed to use this formula to predict the outcome of an experiment? When was the last time you strategically thought through this process step-by-step? Well, chances are if you work in finance you walk through this process quite often. Finance people use this type of logic every day when they are making decisions in regards to their company. After working through this method a few times we were taught that in order to get a more accurate conclusion, you had to make a well-supported hypothesis. This again leads me back to finance. When you’re looking to make projections that will heavily impact your bottom line, it is good to have data to refer to.
By tracking the past, you can make better projections for the future, thus helping you to meet your goals. There are many software features available that will do the heavy lifting for you by creating a custom report that allows you to identify company trends. You can then use custom reports (producing real time data) to make informed decisions as to what changes need to take place. For example, if you can pull a custom report on overtime hours worked in the past two weeks you will be able to more accurately forecast your payroll expenses. This information will then allow you to better fit your ideal budget. This also allows you to make sure you are not over-spending in areas where you are operating on a tighter budget. Maybe your report shows that when your production department worked more hours, the company had a greater return on investment. If that’s the case, you would want to keep this trend in mind.
Your 8-day Forecast
Having custom reports allows you to be more definite in your forecasting abilities and can have a huge impact on the profitability of your company. Let’s back track to my production department example; given the information I presented, you may want to look at the budget you have for the production department and possibly allocate more toward it. This is a great example of using trending information to forecast your finances and prepare a solid company budget. Conversely, maybe you noticed that when you add more people to the production line, productivity goes down. This would be an area where you could use your data to find your ideal number of line members to reach that breakeven point. If you are able to prove (using your data) that having ten employees on the line is just as efficient as having twelve employees there, then you can save the company payroll dollars while maintaining the same product output. In short, having the right data is a great aid when it comes to labor management and finding value in a perceived expense.
Use Data to Increase Return on Investment
The right data can provide you the necessary tools in order to turn operational resources into revenue producers. Creating custom financial reports puts you in control of your finances by showing you where you are spending the bulk of your money, and where your profits are originating from as well. Again, this information is crucial when you’re looking to improve your ROI and become a better forecaster. If you can clearly communicate that by placing ten workers on a production instead of twelve, you are able to increase efficiency and save money then you’ve been successful. It goes without saying, your situation may be vastly different than the one I just described, but the point remains the same; using data to inform your business decisions just makes sense. By pulling a simple report you are empowered to track trends, improve forecasting, and ultimately improve your ROI.
This is just a snapshot of the many ways data can improve your day-to-day tasks and make forecasting for your company more systematic. What are some of the ways your company uses data? Share your answers below!