Data analysis, specifically financial analysis, is like an Apple Watch. Or pumpkin spice cookie butter (it’s fall, okay?). You might initially think that they are fancy and unnecessary, but once you have them (the whole list included), you have that great feeling. The “I need this in my life always” feeling (maybe I’m still thinking about the cookie butter).
Financial Analytics: Why it’s good for all businesses
Let me tell you, there is a tremendous amount of stuff that can be accomplished through having a deep and detailed financial analysis. You can have everything about your company looked at and you’ll know exactly what your problem is, allowing you or your administrative team to make fundamental changes bettering the company. Often you will find out you’re spending money on things you don’t need or can save money on. You will notice trends and see where things are going and plan accordingly. I know that some businesses live day by day, waiting for the checks to come in the door, hoping they get paid on time, hoping they can pay the bills and workers. But what those companies don’t know is that a detailed analysis can totally transform that situation and lead to a strategic plan to totally capitalize on opportunities that were missed previously.
Oh, and just to clear things up, you don’t have to be as big as Google to need your financial data analyzed, and you don’t need to hire someone as expensive as KPMG or Deloitte to do it. Actually, all companies can and should have their data analyzed. And you should definitely consider getting it done through an outside source.
The reasoning behind this is cost versus performance. The average salary for a financial analyst according to payscale.com is a little north of $58,000 a year. That’s no easy pill for some small businesses to swallow, even if they are in the millions range in revenue per year. Bringing on new employees also typically brings other costs with it, such as office space and computers.
Why it’s not always good to let your Accounting Department perform your analytics
On the flip side, if you try to get your preexisting accounting department to do it, you are risking a few things. For one, this will result in more distractions for your accounting department. I cannot speak for all accountants or bookkeepers in the world, but in my experiences, there has never been a shortage of work just keeping up on the data entry and standard tasks. If you throw too much work on them (anyone, for that matter), you risk data and reporting errors. Not only does this cause issues at tax time, but it also causes issues in accurately analyzing your own data! The first rule of data analysis is making sure you have good data to analyze.
Another issue with having the accounting department perform your analyses is that, in general, accountants do not do data analysis. There are obviously accountants who do data analysis (hi), but in general, most do not. And of course, most data analysts do not know accounting. They can surely look at your financial data from a bird’s eye view, but they will not be comfortable digging into your books to find more detailed solutions. It is also hard for anyone in a company, especially the business owners/administrators themselves, to look at data objectively and with a clear mind. Outside parties looking at your business will obviously be less attached to what you want for your company from an operational and financial standpoint and will be more attached to their job of making your company better.
