One of the most important needs for data tracking and analysis is to automate, to the extent possible, tracking of business financial progress. This includes tracking:
- expenses, including deferred expenses like taxes and withholding,
- cash flow, including outstanding invoices and debts, and
- profitablity, regardless of the state of cash flow.
Without a good system for routinely tracking all three of these it is easy to lose sight of the actual state of the business. A profitable business with a cash flow problem is just as likely to fail as having great cash flow but low net profit.
Building and reviewing managment reporting systems, whether automated or manual, on a routine basis is the only way to detect problems early enough to fix them without jeopardizing on-going operations or future stability. There are a series of standard methods and tools for keeping track of these three essential elements but they must be implemented and tracked frequently to be of any real use in keeping your business on track.
Many tools are available for small businesses that track expenses and even cash flow but assessing the profitablity of each line of business requires combining item turnover, costs, and overhead in ways that are not always available in simple accounting packages. It is paying attention to these details that can guarantee the on-going success of your business but it often requires additional tools, either automated or a simple as a spreadsheet, that are routinely maintained and reviewed to keep the business owner on top of long range profitablity or any looming problems. The earlier issues can be identified, the more likely they can be corrected with fewer changes to the business structure, finanances, or business practices.