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Small Business Bookkeeping vs Finance: Better Insights, Better Business



In this data-driven new economy, central to excellent business performance is business intelligence.

You are in business not only to get by.

Your mission as a small business owner shoots for long-term sustainable profitability and business growth. And you will fail in a highly competitive business landscape if all you do is pile your financial reports without trying to understand what it all means to grow your business.

Don’t get it wrong.

There is a wealth of information in your historical records that helps you look forward and beyond to shape the future of your small business into a robustly growing enterprise. Forward-thinking entrepreneurs look at financial data as a gold mine for growth opportunities.

Achieving your business milestones that lead to your fundamental goal to gain profitable success requires business intelligence that will improve your decision-making skill. And to remain competitive, you must be able to do that in real-time.

Big data and analytics are ranked top corporate priority by over half of corporate leaders surveyed by the CGMA. The new age of business economics introduces you to unrelenting competition: fast, innovative, and dynamic. You must be able to perform financial analysis and convert it into a meaningful, actionable data that drives improved business performance. The sooner you learn to keep up with the shift towards data-driven business revolution, the better chances you gain competitive advantage.

But where do you begin?

Understanding the relationship between finance and bookkeeping 

The first step is for you to understand that bookkeeping and finance are two important disciplines in business that you must begin to learn.

Here's a quick lecture on the key differences between bookkeeping and finance in business that you should know before we break down how you can combine data that can help you gather smart insights. Then, you can make sound business decisions and boost your profit to grow your small business.

 

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5 important things to remember about bookkeeping

Bookkeeping is the systematic and comprehensive recording of financial transactions pertaining to a business, and it also refers to the process of summarizing, analyzing and reporting these transactions to oversight agencies and tax collection entities. -Investopedia
 

small business accounting

#1

Bookkeeping looks back at all your business transactions and other financial data.

small business accounting

#2

Bookkeeping normally forms the basis for tax assessment required by federal and state laws.

small business accounting

#3

Bookkeeping reports all business financial transactions including all your revenues and expenses.

small business accounting

#4

Bookkeeping is about all the internal data or the financial information for your business.

small business accounting

#5

Bookkeeping is prepared by cycle such as monthly, quarterly, or yearly.

 

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5 important things to remember about finance

Finance describes the management, creation and study of money, banking, credit, investments, assets and liabilities that make up financial systems, as well as the study of those financial instruments. -Investopedia
 
small business finance

#1

Finance looks forward, which includes business planning, budgeting, and forecasting.

small business finance

#2

Finance is more about planning and budgeting to properly manage money for your business.

small business finance

#3

Finance makes use of certain model scenarios and calculation analysis.

small business finance

#4

Finance combines both internal and external data producing a financial report that compares against industry average or a benchmark data to make a better sense of how your business is doing.

small business finance

#5

Finance is prepared by management cycle depending on how management or business owners would like to monitor their financial data.

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You can download the presentation we created for you on SlideShare.net. FREE.

 

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Learning the key differences between bookkeeping and finance was the preliminary step. Now, we take you to the real question: how can combined bookkeeping and finance data help you develop your small business strategic plan for sustainable growth?

The simple answer is to find meaning in your numbers.

But don’t make a mistake: simple doesn’t mean easy.

Understanding your key financial drivers is not always a breeze for everyone. If it were elementary math to interpret financial data and perform financial forecasting, there should be 100% success rates among small businesses. The sad story is that less than 50% of small business startups succeed in their first four years of operation.

Understand that there are multiple reasons to fail in your business venture. But there is one consistent driving force to failure: lack of good business intelligence.

If you are serious about business success, get a little professional help from trusted finacial advisors. Better yet, hire a part-time CFO who can analyze your business revenue and expenses trends and help you design an integrated profitable program for small business. You will need a CFO’s special skill sets in strategic business insights - the key to increasing your small business value. But you may not need a CFO’s full-time service; so take the best value option you can get.

CFO Services Katy Texas

 

Shaping small business growth strategy with smart insights

To architect small business long-term profitable success is about shaping your business strategy. Combined roles of bookkeeping and finance delivers intelligent, actionable insights you will need to make smart business decisions. But that may not be enough.

  • Embrace technology
It's the new age and how you do business is changing - fast-moving, real-time and data-rich. The epicenter of creating your competitive business advantage and increasing your value is technological innovation.

You must be able to keep up with the changing entrepreneurial landscape.

Gain smart business insights and collect it in real-time to make effective decisions at a quick pace while opportunity is hot to break through success. A successful business model is always ready to adapt and adjust to any climate.

  • Identify most profitable key performance drivers

Growing a small business is about improving profitability. But it is more than just increasing revenue. It's about strengthening your most profitable revenue sources.

When you learn to read your financial statements, go to the section where you can find your collections that earns you the highest profit. Identifying your key performance drivers becomes relatively easy as you begin to get comfortable reading and understanding the numbers in your financial report.

  • Take risks and allow calculated failure

At some point, you must be willing to take the ambiguity challenge. Yes, take risks and fail. But calculate your failure within acceptable parameters. Let's remember that the greatest success in business did not start out with certainty.

Success is about finding solutions. And there's never a sure fire. So, be prepared.

While it's a little too vague a prescription for business success, the earlier you accept risks, the better you can be prepared for the adverse outcomes.

Harnessing the power of data for increased profit

Information is power. And when you make data-driven business decisions, according to most finance professionals surveyed, there are two major benefits:
  1. Higher efficiency in business productivity and performance
  2. Increased key business performance

Small Business

Of course, there are challenges. It’s easy to drown in a pile of financial data. Finding value in numbers remains a struggle for most small business owners who opt to DIY bookkeeping and finance functions of their small business. Quality is another. You must be able to generate reliable financial information to make accurate forecasting.
 
The greater challenge for small business owners unfamiliar with financial data is to understand the meaning behind their numbers and how they can best utilize their financial information to improve their business performance.
 
There are four areas where you can harness the power of data analysis and improve your business profitability:
  1. Planning
  2. Budgeting
  3. Forecasting, and
  4. Performance management
“Know how to aggregate outcomes so it can be converted into an insightful report,” James Miln, Senior Finance Director, Global Operations Finance, Yahoo!.

 

Bottom line: better insights, better business

The key to small business success as you move into data-driven decision-making process is to identify a clear objective of how you want to use your financial data and then select the appropriate tool that can help you best achieve your business goals.
  • Your financial reporting should be looking into the future for actionable strategic insights.
  • Filter; then, analyze data. From a mountain of financial information, you should be looking at important numbers on which you should run an analysis. Make it quick; the modern business landscape is volatile and always changing. What could be effective today may not be the same tomorrow.
  • Smart insight generates a combination of internal and external data.
  • Develop the habit of making data-driven decisions on business operations and investments with mitigated risks.

Here is a final question for you: Are you prepared to make data-driven business decisions?

 

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We help you plan, forecast and analyze your financial data
so you can get on top of your finances today to grow your
small business big tomorrow.

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