How to use real-time data to improve the financial health of your business


Measuring the financial health of your business is critical to its long-term survival and requires real-time data. But if your data isn’t in an easy-to-access place, you can’t successfully track or improve your business’ financial health. Automation software helps you keep tabs on the financial pulse of the business, giving you real-time cash flow and spend visibility to make better business decisions.

What’s the best way to measure the financial health of your business?

The answer, unfortunately, is not as simple as calculating net profits. Indeed, the health of a company depends on several factors, including the industry it occupies, the stage of growth it is in, its unique challenges, etc. Unfortunately, there is no “magic” metric or number that will judge your organization as healthy or not.

To paint a clear and complete picture of your financial health, it takes a handful of key performance measures considered as a whole. Unless you are a publicly traded company (which most American companies are not), you are not required to produce and publish your quarterly and annual financial results. As a result, chances are those numbers are still living in a disparate jumble of spreadsheets somewhere in the cloud or on a shared server, making it difficult to accurately determine your company’s financial health.

The major issues of financial health

Financial awareness is not lost on most leaders – financial or otherwise – in growing organizations. After all, the data paints a pretty bleak picture of companies’ long-term survival chances. Roughly two out of ten companies bend during their first two years of operation. Another 45% do not live past their fifth birthday and 65% have died in the water by the 10th year. Only a quarter of new businesses will become old enough to drive on a learner’s license (ie reach age 15).

A business can fail for many reasons – from lack of market need to poor location choice – but its demise often comes down to poor financial planning and management decisions due to a lack of spend visibility. In its purest form, financial planning is about understanding your business’s cash flow, both inflow and outflow.

If you have great spend visibility, it means you maintain a good overview of your company’s spending habits. Therefore, you can use this information to make more informed and accurate decisions about where to direct your limited resources to streamline operations and improve your margins. On the other hand, little or no spend visibility (meaning you’re not tracking your spend in a meaningful way) will cause operational chaos, drain your resources, and most likely lead to the untimely demise of your business.

Most companies today fall somewhere in the middle, but that’s not because they don’t. want to to increase their visibility. On the contrary, companies remain ignorant of their overall financial health because they are bogged down by the way things have always been done.

For example, the month-end financial closing is one of the most critical processes for any business leader, especially the finance department and CFO. It begins by recording journal entries for each transaction made that month and ends with preparing for the following month. However, there is a whole series of steps in between. If you cover all your bases, you’ll have financial reports that accurately reflect the financial health of your business.

The power of automation

Automation is known to help speed up tedious processes, but it does more than that; it also allows accounting teams to focus on more strategic initiatives and allows you to keep an eye on the financial pulse of your business. Indeed, automation allows you to obtain real-time cash flow and visibility on your expenses. Remember, the more visibility you have, the more you can maximize your overall business efficiency and minimize risk.

Despite the proven benefits of integrating real-time financial data into accounting processes through accounts payable automation, the skeptics prevail. More often than not, their intentions are good. For example, many business leaders believe that sharing data between departments puts their company’s sensitive financial information at risk.

As Data Breaches Rise More and More frequent by the year, that’s a valid fear, but business leaders needn’t worry. Today’s AP automation software is armed with sophisticated data protection measures that significantly reduce risk and enhance the benefits of real-time data share with the whole team.

A few measures have been put in place within the framework of financial controls:

  1. Continuous selection, verification of suppliers and validation: Have peace of mind that you will not unwittingly pay questionable payees on the Office of Foreign Assets Control, Anti-Terror and Anti-Narcotics lists and will enhance the security of sensitive payment data through a self-service portal that collects and stores information.
  2. Electronic payments: Automated Clearinghouse, Global ACH and Wire Transfers are inherently less risky and offer less risk of fraudulent payments. (These should not be confused with online payment methods.)
  3. Data access controls and signing rights: Gain more control over who has access to what, minimizing insider risk and fraud (both friendly and harmful).

Another common reason we see companies resisting real-time data is that they have yet to embrace the cloud-based solutions and automation tools that make this financial data readily available. So, the first step in this process is to implement AP software solutions that can help automate the capture of critical financial data from source documents.

Since all data is digitized and stored in one system, you can consolidate entities, geographies, accounts, and payment methods into a single report. You’ll be able to gain detailed insight into every payment transaction and sync those results with your enterprise resource planning or accounting system to reduce human error and ease the pressure on the monthly close.

Achieve (and maintain) financial health

Armed with real-time financial data, you can begin the process of improving your business’ financial health. Consider these four steps:

  • Improve efficiency with the right technology solutions to stabilize operations and adapt to rapidly changing market conditions and business needs. COVID-19 is perhaps the most stark example of how rapidly circumstances can change, but the global pandemic is far from the last market disruption we will see. Use your real-time financial data as an indicator of change and learn to balance short-term and long-term needs to withstand unpredictability.
  • Ensure expenses are reviewed and approved throughout your financial workflows to support overall operational decision-making. As mentioned, successful finance managers accelerate financial close and provide real-time visibility into cash flow and spend while improving vendor payment transparency.
  • Implement intelligent, automated controls to help your finance department stay lean while preventing fraudulent expenses and costs, reducing fraud losses, eliminating non-compliance penalties, and establishing seamless operations. audit test. According to Tessian, human error is at the root of the vast majority (85%, to be exact) of data breaches. The more you can automate your accounting workflows, the less human error you will have to deal with.
  • Transform all global payment operations to stay economically sound.

Unfortunately, no business is immune to the effects of poor financial health. With this simple reality in mind, build a more resilient organization by leveraging automation to capture real-time financial data, boost accounting efficiency in your workflows, and increase visibility.

Written by Alex Cedro.
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