TaurusTalk

Financial inputs for better profitability

Increased levels of automation and artificial intelligence have sharpened the ability to provide analytical information for better performance analysis and management controls.

The small and medium enterprises who have a continual need to manage customer satisfaction, costs, performance monitoring and to aim for growth against stiff competition need to have structured financial data regularly with key metrics and dashboards.

Some of the software such as QuickBooks, Xero, SAGE, etc., provides enhanced capabilities to enable this kind of analysis. Using appropriate Accounting and coding structures through Class and Category in QuickBooks, Category, and options in Xero, one would be in a position to make a meaningful comparison of the performance of several segments of the business or several geographies or several profit centers and so on.

One would hasten to add that it requires some detailed understanding of the business requirements as well as the enabling options available in the respective software. With this knowledge it would be possible to track all the billing, expenses, fixed assets and even working capital employed in a particular segment of the business say for instance a particular line of apparels in an apparel trading business.

Likewise, to track sales against marketing efforts and expenses in each region such as North, South, East, and West, it would be possible in Xero to make an analysis based on category and tracking options. The methods adopted could be fine-tuned based on experience gained in such analysis and further improvising the tracking methods to suit the specific business conditions.

Budgets could be created on similar lines for each line of business, geography, Departments and even Business Heads whereby the actual performance against the specific budgets could be made for a meaningful insight into how the business is performing in several directions.

Such analytical information provides a deep insight into how the business is conducted, what are the key variables affecting the profit or loss of each segment of the business, what-if analysis on any particular variable and its impact to enable good management control for improved profitability.

The constant need to innovate in each business to deliver high value to clients with highest customer satisfaction necessitates the adoption of such advanced methods of tracking performance to provide good insight into business performance and course correction in a timely and efficient manner without burning too much or losing one’s shirt.