financial data Archives - Senior Executive

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 If you get your data at a lag, you’re operating based on outdated information, which can lead to a host of issues.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.

Enrico Palmerino

“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. ”

– 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?

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.