Insights from real-time, robust and reliable Management Information is the navigation tool for businesses to understand where they are on the journey and if they are on track to reach their destination.
A business’ finance function has traditionally been process driven and often reactive in generating value for the business. The growth in digitisation of financial processes using AI, robotics and digital platforms has begun to revolutionise traditional manual processes into more streamlined, efficient value generating aspects for the finance function of a business.
Several factors have accelerated this growth in recent years. The pandemic has forced businesses to put in place systems to provide real-time, robust, and reliable financial information to help businesses better understand and navigate the challenges and uncertainty. The digitisation of systems has gathered pace as businesses transitioned to remote or hybrid working.
The pandemic has intensified cost efficiency initiatives in light of increasing raw material and shipping costs and the additional costs of trading globally post-brexit. All these factors have led to an increase in businesses taking advantage of rapidly evolving technologies to automate and streamline previously time intensive manual processes.
In this new digital age of automation, AI and robotics, data insights have become an incredibly valuable asset for any business. Against this dynamic backdrop there are significant opportunities for finance teams to better use data to improve strategic decision-making and planning.
We can consider the analogy of real-time, robust, and reliable financial information being the navigation tool for businesses to understand how they are travelling on the journey to reach their destination. Management Information (MI) is crucial to understanding how a business is performing and the valuable insight that provides can determine the timing, impact, and effectiveness of business decisions. The pandemic brought the value of better MI into focus, those businesses that were able to pivot and maximise opportunities based on robust and real-time financial information managed to effectively navigate the challenges around them.
Data insights provide powerful indicators of performance, profitability, and efficiency. Businesses can gain a competitive advantage from turning financial data into actionable insights.
Effective Management Information allows key metrics and KPI’s to be tracked to facilitate actionable insights and better decision making, allowing business owners to make sense of data around performance, position, overall health and compare against targets and goals.
The growth of digital finance platforms has opened significant opportunities for businesses that were once only reserved for those with a level of sophistication in their finance teams.
Dashboard and KPI reporting tools allow businesses to track performance based on key KPI’s and metrics that are specific to that sector or industry, allowing a greater degree of focused insight to help support crucial business decisions. The key value driver is that these insights provide a valuable basis for tracking and assessing performance; and the process of regular review of these metrics enables key drivers and levers to be applied to pivot decisions and improve performance with better insights into the impact of any decisions on the financials.
There are a number of KPI’s that are important to most business, here we share some important ones for most businesses:
Gross profit margin, allows companies to see the level of profitability they are generating after taking into account the costs of generating that revenue.
Debtor days, indicates how long it takes to collect in debts owed to the business, this should be on par with the credit terms offered to customers.
Stock turnover, Holding on to stock for an increased time can mean that funds are tied up in the business that could be better utilised elsewhere.
Net cash flow, measures the incremental difference between all cash inflows and outflows within a set period of time. Profitability is one aspect, but managing the amount of cash in a business is even more important.
Payroll v revenue, typically one of the highest ongoing costs within a business is the payroll costs. In a company making steady sales the value of payroll should be relatively constant, in a growing business it would be expected for this to increase with new hires to meet increased demand.
With data-driven insights at your fingertips, it’s much easier for businesses to make better-informed decisions on how to run and level up the business.