9 Must-Have Financial Analytics Data Points to Look For
August 28, 2023
Is Financial Trouble Brewing?
There are many financial metrics that can indicate that trouble is brewing in a company. Most of them tell you what’s happening in your business, but they don’t tell you why. Let’s explore the more important metrics, revenue, profit, and contributing indicators that will help you gain a comprehensive picture of your business’s financial health.
Is Your Revenue Declining or Flat?
If your revenue growth is negative or slow, your investors are going to demand to know why this has happened. Here are some of the most likely answers:
1. Low Customer Demand
Have your customer’s preferences changed or is the market saturated, meaning most customers who want a product or service have already purchased it? Data sources such as transaction records, customer surveys, web analytics, market research, or social media posts can provide insights into evolving customer preferences.
2. Dissatisfied Customers
Is revenue falling because your customers are leaving or cutting back on purchases? To gauge customer satisfaction, explore customer feedback in customer complaints, and customer surveys, particularly Net Promoter Score (NPS) to assess customer loyalty. Other important metrics you should use include customer churn rate, customer lifetime value (CLV), repeat purchase rate, and average order value (AOV).
3. Increased Competition
Your revenue might be under pressure from competition with more favorable products and/or prices. Analyze competitors and changes in your own prices to see if these are impacting your revenue.
4. Weak Economic Conditions
Downturns in the economy can damper consumer and business spending. You need to monitor economic indicators such as Gross Domestic Product (GDP), unemployment, interest rates, and the consumer price index (CPI) and estimate how sensitive your company’s products and services are to these numbers.
5. Losses or Low-Profit Margins
Even if your revenue is growing at a steady clip, you can still be losing money or making very little profit. Here are some common causes.
6. High Cost of Goods Sold (COGS)
Rising input, labor, and overhead costs can quickly erode profit margins. While inflation is beyond your control, you can use financial analytics to reduce operational inefficiencies. For example, analyzing current and historical sales data and market trends helps to better predict customer demand. This can lower the COGS by helping to optimize production levels, reduce excess inventory, and avoid stockouts. And, by analyzing transportation costs, lead times, inventory holding costs, and order fulfillment, businesses can optimize the supply chain to reduce the COGS.
7. Suboptimal Pricing
By analyzing cost components associated with producing and delivering products, businesses can set prices that cover costs while ensuring profitability. Analytics can also estimate price elasticity, which measures the responsiveness of demand to price changes so that businesses can optimize pricing and promotional strategies.
8. The Wrong Product Mix
Analyzing sales data, costs, and other financial data helps businesses identify their most profitable products and prioritize these for development, marketing, and sales efforts. Analytics can also highlight low-margin products that may need price adjustments or removal from the product mix.
9. Compliance Costs
It’s expensive to comply with all the various laws and regulations and fines for violations can be exorbitant. By leveraging financial analytics in compliance management, businesses can lessen the impact on profit margins by enhancing their ability to identify, prevent, and mitigate compliance risks.
Improve Your Financial Analytics with Actian
It’s important for you to assess factors specific to your industry and business to develop strategies to overcome slow revenue growth and low-profit margins. The right data platform is also critical to your success. This is where Actian can help.
The Actian Data Platform provides a unified experience for ingesting, transforming, analyzing, and storing data for financial analytics. Don’t take our word for it. Try our Actian Data Platform Free Trial to see for yourself how it can make financial analytics easy. You can also read more about the Actian Data Platform.
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