Utilize Data, Invest In Technology & Plan Strategically
The core backbone of any business is its financial records since they are ultimately what valuations are based on. Exceptions occur in high-tech and other industries. Data and tracking may be the most difficult to implement. This is because a significant investment in technology and labor hours is typically required before you can institute actionable data-driven plans. In addition, it requires leadership within the businesses to change “well that’s how we’ve always done it” mentalities. Driving this kind of change is extra work, especially initially, but it’s well worth the effort in the long term.
Two of the most significant data and technology investments with the greatest ROI are accounting and
ERP (enterprise resource planning) systems. The timing of these investments is critical, because the larger a business grows the more difficult it is to change these systems. However, implementing a robust business software system too early can be uneconomical relative to the cost.
Additionally, a business’s books and records are the first things that outside capital providers look at to assess risks. Highly valued businesses understand this and make the investments in technology prior to growing and scaling.
Clear and accurate data about your financials, capacity, fulfillment and integrated sales pipelines enable decision makers to make smart investments in people and focused advertising. In addition, with enough historical datasets, the best businesses can begin predicting with higher effectiveness their short, intermediate and long-term sales and cash flows, allowing them to operate more effectively. Lastly, if you have a robust accounting and ERP system, it allows your CFO to focus on forward-looking initiatives and growth rather than simply keeping reporting accurate.
If you’re making decisions based on feeling and not data, chances are you’re falling behind the times and at some point it might diminish from valuation or cash flow.