Mon May 16, 2022 | | Financial Reporting

4 Financial Analytic Myths That Businesses Believe


financial analytics on a laptop

Data analytics, the ability to get data from your business and make sense of it, can be daunting for businesses of all sizes. Getting started with data analytics for your business can be challenging if you don’t understand some common misconceptions about how best to use it. That’s why we’ve looked through four common myths surrounding financial data and insights, along with some advice on how to get started.

 

Data Is Always Reliable

This may seem intuitive, but just because the data exists doesn’t mean it’s correct. As an organization grows, the data sprawls outwards. Information comes from people in different departments, and it may seem simpler to assume that the data coming into your accounting system is valid. In our experience, this is often not the case. Context is a crucial part of every piece of information, and that context can rarely be captured accurately by fields, forms, or screens. Making sure that different departments in your organization are able to see the financial data relevant to them gives them the chance to find inconsistencies before they explode into larger issues.

 

Simple Metrics Reflect Reality

This problem shows up quite frequently. If an organization wants to know who the most productive employee is, they look at hours worked. But that metric is incomplete. Another employee might have lower hours and higher productivity. Yet another might log lots of hours and have low productivity. The best employee is not always the one with the most hours worked. A person can spend more hours but lack consistent results. You need all the relevant data to paint a complete picture.

 

Excel Can Fix Any Issue

A lot of organizations struggle to collect the reports they need in their accounting software, or they have to clean up the data in Excel to use it effectively. Using Excel to clean up the data often leaves them in an unmanageable mess that is passed around without finding its way back into the core accounting system. Excel is best for prototyping financial models and “what if” scenarios, but it should not be used for cleaning up persistent data problems.

 

Accounting Software Is Enough for Analytics

Most accounting software packages offer basic reporting, but they aren’t built for analytics. Most accounting software offers companion software or add-on products, but they still aren’t comprehensive enough. If you are serious about understanding your data, you need solutions built specifically for analytics and you need a team that understands your business. Microsoft Power BI and Tableau are examples of powerful and flexible analytics tools which can uncover insights into your data that can help you make better decisions than ever before. Partner with an analytics provider that understands your existing accounting software and business goals to uncover insights into your data and make better decisions.

 

Conclusion

We hope this article proves to be useful when it comes to helping you clear up any misconceptions you may have had about data analytics. It’s in your best interest to be fully informed about data analytics so you can maximize your business. Be sure to keep everything you’ve learned here in mind so that you can make the best decisions for your business.

At CFO Strategies, we provide bookkeeping, accounting, and CFO services to companies on a permanent part-time basis. We customize the services we provide based on your company’s needs. By hiring us on an outsourced and remote basis we are able to put together accounting and financial reporting services at an affordable price.  Reach out today for a free consultation at (732) 236-4454 and take charge of your company’s financial health and success.