A successful business needs two important ingredients such as planning and controlling. A strong financial analysis helps to formulate the strong business strategies. Financial data helps in strategic planning which are useful in making changes if required. Such a significance makes the Financial Data Analysis and Management a vital factor for the success of the business.
An appropriate accounting system is also required and it is helpful in the data acquisition. The business survival and he growth is hard to imagine without a properly managed accounting system. There are companies and software developers that help to customize the softwares according to the requirement of the user. They also send in the team for the installation of the software as well as for training of staff if required.
Accounting system is built keeping in mind the key financial management tools:
· Income statement · Balance sheet · Cash flow statement · Budgets · Break even analyses
A financial management system helps to identify the alarming areas or highlight the areas which are more profitable. Without this system, it is difficult to organize the financial data and effectively formulating the strategies for future. The planning and strategy formulation seems impossible to manage without appropriate accounting systems. Inaccurate financial analysis proves to be disastrous for the company.
The results are more productive when the accounting system is adopted throughout the organization. The systematic application of the system in every segment makes the decisions transparent and fair. The accounting system reflects the health of the organization or the decisions taken by the upper management. Training of the employees on such systems is important and must be encouraged so that the procedures become speedy.
There are two important and fundamental principles of any business: to be profitable and have enough cash flows for the payment of obligations. Here the cash flow and the income statement lays a very important role. The operations of the company are represented by the income statement and he cash flow shows how well the cash of the company is managed. It also shows the liquidity position of the company.
The need is to find a correct balance between the profits and liquidity, which if not maintained well, is difficult to manage. If the business is showing a fast growth rate and profits, then liquidity is difficult to manage as it will drain the cash of the firms in investments. If projected cash flow and income statements are made with the help of financial software, then problem areas are easy to identify and effective planning can be done in the form of raising capital and financial equity. Additionally areas which need controlling are also recognized.
Breakeven analysis is done on the basis of cash flow and income statement. The revenue volume from sales is estimated by the break even chart and balances the fixed and variable expenses. Thus break even analysis helps to:
· Setting the price of the product · Decision of purchasing or leasing the equipment · Profit projections on the sales value · Determining the need for new employees · Setting the strategic objectives