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Knowing where your business stands financially is arguably your most important responsibility as a leader. You should be keenly aware of your organization’s financial status in all seasons, especially now, as some experts predict a recession is inevitable.  

You likely have a mountain of financial data at your fingertips, which can be a bit of a double-edged sword. How do you even begin to sift through all the available data? How can you tell what’s relevant and what’s not? Over the course of my career developing an AI bookkeeping software and working closely with accountants and their clients, I’ve seen the types of mistakes business leaders routinely make. While there are about a million things you could do with your business’s financial data, there are some you should absolutely avoid at all costs.

Don’t: Just Rely on the Money in the Bank

A lot of business owners run their organizations out of their bank accounts. The problem with this approach is the sheer volume of nuances surrounding cash flow. For example, let’s say one of your clients paid you a bunch of money upfront, but you will have a lot of costs associated with that project over the next few months. It looks like you have a bunch of money today, but if you haven’t factored in what you’re going to be spending, you don’t truly understand your business’s finances. And if only 10% of what’s in your bank account today will be left once the project wraps, you’re effectively running your business blind.

Don’t: Delay Reviewing Your Financial Data

Compared to strictly relying on cash flow, monthly financial reports are a better, albeit imperfect approach. If you look at your monthly financial boards, you can use those as guides for what products you have margin on, and how things are generally going with your business. But ideally, you’re looking at your business’s financial data more often than once a month.

Simply put, trends are helpful. Understanding variance is helpful. But being able to have that information on a real-time basis, or as real-time as possible, is super powerful in order to get an accurate picture of where your business stands. If you get your data at a lag, you’re operating based on outdated information, which can lead to a host of issues. Get into the habit of regularly checking in on your finances so you can put out any fires as quickly as possible.

“Your business’s financial data is one of the most—if not the most—important data sets you have access to as a business leader. Don’t play fast and loose with it. ”

CEO & Founder of Botkeeper

Senior Executive Contributor

Enrico Palmerino

– Enrico Palmerino

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Don’t: Ignore the Context

So you’re getting a more holistic view of your finances, and you’re reviewing the data in real time. Here’s where the context starts to come in. Personally, I like to use dashboards because, as we explored above, they show you what’s trending. Are the margins getting better, or are they getting worse? But now you need to ask why certain trends are happening, and in order to find the answer, you’ll need to consider the context.

Right now, for example, inflation is really high. Wages are climbing, your margins are probably going down. If you aren’t doing price hikes or addressing the issue some other way, then you’ll just watch your margins get crushed. So take some time to ask why. Look at your numbers, look at the trends and ask, fundamentally, what does this mean and why?

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Don’t: Take a DIY Approach

As a business owner, you probably don’t have an accounting background. Maybe you took an accounting course at some point, but you’re not an accountant, so don’t pretend to be one. This is where the experts come in. 

Instead of trying to figure out what’s happening with your finances, your accountant can tell you, “Hey, this is just a timing situation—your cash flows are pretty strong and steady,” or, “Your balance sheet looks really weak and here’s how that’s going to impact you.” While they can’t read the tea leaves and tell you with exact certainty what’s going to happen in the future, an accountant can explain to you what’s going on in your business, and the actions you can and should take going forward.

You can try to do it yourself, but like with anything in life, you can have access to all the information in the world, but if you don’t know what it means or why it matters, you’re not going to make great decisions.

Do: Take Charge of Your Financial Data

We live in a data-rich world. We’re constantly bombarded with everything from our health data to search traffic analytics, but that doesn’t mean we’re all experts at deciphering data sets and utilizing the information to its full potential. Your business’s financial data is one of the most—if not the most—important data sets you have access to as a business leader. Don’t play fast and loose with it.

The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

It’s time for a reality check on your data-gathering efforts. You’re probably monitoring basic workforce demographics, and you should feel good about the weekly “pulse” surveys you’ve implemented to broadly track employee satisfaction.

But what about specific departments? Do you see data that would reveal team-wide disengagement before it becomes a retention problem? Do you act on it?

Or even a specific worker, one of thousands of employees… working in a remote country? Is he happy? Does he have any lingering questions or concerns about employee benefits or company policies?

“The biggest handicap I see for HR individuals and HR executives is [not] having real-time data and metrics,” says Patricia Sharkey, senior director of human resources at IMI, a company that provides resources and software to automate distribution facilities across the globe. “That’s the way we’re going to be taken seriously.”

The company uses a homegrown, AI-driven HR platform called Rhonda to engage employees regularly, execute key HR functions such as performance reviews, and collect and analyze data to identify HR hotspots for leaders to act on. “What Rhonda does for HR, and what it brings to this company, is that our CEO has real-time metrics and data that he can make decisions based on,” Sharkey says. 

Senior Executive Media recently interviewed Sharkey about the company’s approach to employee communication and engagement. Read on for edited excerpts from our conversation.

“The biggest handicap I see for HR individuals and HR executives is [not] having real-time data and metrics. That’s the way we’re going to be taken seriously.”

Headshot of Patricia Sharkey

– Patricia Sharkey

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Senior Executive Media: How is Rhonda regularly engaging employees and improving employee retention?

Patricia Sharkey: We have weekly surveys that go out, and employees rate, on a scale of one to five, how their week has gone… It’s a simple weekly, like, “Hey, please let us know how you’re doing.” And this goes out to the entire company. If an employee scores a three or lower, they’re going to get contacted by their manager, or by HR, and in some cases by the CEO directly, which is awesome.

I have employees that, every once in a while, I think they want to put a two because they want to talk to [CEO] Rudi [Asseer] because it turns out things are pretty good.

We run weekly reports that measure how many people are responding to us… I receive weekly reports of who’s engaging… If they’re not responding, or we’re getting a low response, we ask the manager, “Hey, how come your team isn’t responding?”

Senior Executive Media: What else does Rhonda do?

Patricia Sharkey: It’s a big part of the safety culture. We send out safety messages every Thursday. People can talk to us about any safety concerns.

We also have a weekly “hustle” that we send out via Rhonda, which is a newsletter, which reminds employees to respond to Rhonda and lists the employee of the week, by the way, too. So they’re engaged in the employee hustle because they may also see rewards.

Our employees can ask questions to Rhonda, like, “Hey, what’s up with my bank account?” … While we have an HR help desk and different areas where employees can contact us, the most successful is the AI application.

And with AI, it’s been much easier for us to get [performance] reviews back from the employees… This approach has increased accuracy, speed and employee satisfaction because it’s so easy for them to complete.

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Senior Executive Media: During the actual conversations within the performance review process, how does the data you’ve collected come into play?

Patricia Sharkey: Managers… talk to their employees about their [self-evaluations] and how, say, for example, the employee gave themselves a three [in a certain area], but the manager scored a four for them.

Then I’m given all that information as well. Not only am I able to see the scores of each employee and what the managers are giving them, the AI also does the average of what the department’s overall score is, which is pretty interesting—great data for the CEO. Because it takes some of the subjectivity out and goes, “Alright, you’ve got your divisional lead, maybe saying he has the greatest department in the company. But look at these overall scores.”

Related article: Measure Your Culture and Employee Experience — 10 Human Resources Metrics to Track

Senior Executive Media: You’re gathering so much data. What are the most important or most interesting metrics that you specifically look out for?

Patricia Sharkey: What I’m looking for, as I’m doing a temperature gauge on my employees: Are they happy? Are they going to stay with us? Through data, you can see patterns of behavior, right? I can tell if someone’s not happy if I see that I’m getting a lot of twos, right? I have to not only do a one-time check in, but now I have to go and say what’s going on? What systemically is happening in this department if I see, you know, in one department, I’m getting lower scores, or people not responding? (People not responding is almost the same thing as giving a low score, in my opinion.) And the question is not about the employee, it becomes about the company and systemic practices. What are we doing well, and what aren’t we doing well?