If you’re using accounting software, every financial transaction your business makes is recorded and tracked. This information is valuable, providing insights into trends and enabling you to make decisions you might not otherwise consider.

With accounting software, you can view all your accounts in real-time. The software links directly to your business bank account, so you can easily check your cash position without having to manually track your finances. You can also access your financial data anytime and anywhere, as long as you have an internet connection and a device. This flexibility means you can update your accounting records even from your smartphone.

Additionally, accounting software allows you to give access to your staff, with the option for limited access. This makes it easy to delegate tasks, such as preparing invoices. The software also helps you keep track of outstanding debts, so you can see who owes you money on a daily basis.

 

Making the best use of your financial data

One of the most common uses of accounting information is to create budgets and forecasts for business planning. By incorporating accounting data from prior years, you have a figure to start from when projecting sales and expense amounts for the upcoming year. You will be able to:

• Compare last year’s daily, weekly or monthly sales to see how you are tracking. Instead of waiting to the end of the year to identify trends, you can see them more immediately.
• Identify which products and services are selling the best/worst, to help you plan any changes in the product mix. Poor sellers can be removed, best sellers can be promoted.
• Review trends such as wages to sales ratios to determine if you’re paying staff more relative to sales, if they’re working harder than before, or have become more efficient.

When you leverage your financial data effectively, you can make more informed decisions, refine your business strategies, and stay ahead of any potential challenges throughout the year.

 

Keeping track of cash trends

Accounting software also gives you the chance to keep tabs on your cash. For example:

• You can determine where your cash is coming from, such as repeat customers or new ones. Identify which provides the best opportunity to grow.
• Identify which products, services or segments have the best margins, and which have the worst.
• Pinpoint deteriorating margins, especially where it’s traditionally difficult to match suppliers to specific products. It’s easier to see if you’re slowly paying more for raw materials or inventory than before.
• Track your customers spending habits to determine who are the most frequent and ho=ow much they’re spending.
• Spot the habitually late payers who need to be either followed up early, or possibly you no longer want to sell to them.
• Track the small expenses that often are hard to measure. For example, determine if phone bills or office expenses are going up compared to sales.

Understanding the cash trends of your business means you’re in a better position to take action to improve your profits. Accounting software is the new tool to help you get this data daily.
 

Business analysis

This is an essential practice for staying on top of your company's financial health. Many small business owners choose to review their accounting information monthly, comparing actual sales, expenses, and profits to projected figures. By regularly tracking these numbers, you can quickly identify any substantial variances between what was expected and what occurred. If discrepancies arise, it provides an opportunity to adjust before issues grow into bigger challenges. Regular reviews not only help you address immediate concerns but also allow you to refine your budgeting and forecasting skills, leading to better-informed decisions over time.

 

Investment decisions

If you find you have a cash surplus, your accounting data can determine when to invest these funds. By reviewing cash flow projections, you can assess both your short-term liquidity needs and your long-term capital requirements. This allows you to determine how much cash should be allocated for immediate expenses, such as operating costs, and how much can be invested in growth opportunities, whether that’s expanding inventory, purchasing equipment, or pursuing new business ventures.
 

Next steps

• Make a habit of checking your accounting software regularly to compare your actual financial performance to projections. Spotting discrepancies early can help you address issues before they become larger problems.
• Use the insights from your accounting data to identify product or service trends, as well as cash flow patterns. This will allow you to make informed decisions regarding pricing, inventory management, and customer targeting.
• Pay attention to your business’s cash flow trends, including where your cash is coming from, and which segments offer the best margins. This data can inform decisions on where to focus your resources for maximum growth.
• If you have a cash surplus, use your accounting software to assess both short-term and long-term cash needs. This will guide you in making investment decisions that support sustainable growth while making sure you maintain enough liquidity to cover your day-to-day expenses.

Investing in good accounting software can provide you with up-to-date information about your financial data. Even if you use an accountant, you should have access to your business’s accounting records so that you can see at a glance what your financial position is and how best to use that data to improve it. If you do have an accountant, make sure you sit down with them on a regular basis and discuss how best to use it. The more informed you are about your business’s financial position, the better placed you’ll be to make decisions and predictions about its future.