Everyone enjoys a fresh pair of socks. They can change the entire direction of your day, and the same can be said about financial intelligence and how it can change the entire direction of your business for the better. There are various ways to gain financial intelligence, however, one of the most insightful and impactful is through the practice of benchmarking. Below are 5 ways financial intelligence and the insights that are provided with benchmarking, which are more refreshing than a new pair of socks.
1. Revitalize with financial intelligence
Financial intelligence can help you revitalize your business by giving you insight into its current state. The more information you have regarding your company, the more informed your decisions become. This, in turn helps with revitalizing an otherwise stale business. For example, by benchmarking in your industry you gain financial intelligence, allowing you to see trends in the industry. Furthermore, using analytics Intelfolio even provides additional insights about your competitors! Key performance indicators (KPIs) such as EBITDA, current ratio, debt to equity ratio and gross margin can all give insights to help business owners make better decisions to revitalize the business.
2. Invigorate your business
Every business owner wants a healthy business, but how do you measure your businesses’ health? The answer is Financial intelligence. Financial intelligence operates as a measure of your businesses’ health, and so by tracking it you can effectively track how healthy your company is. On top of that, with this newfound “health meter” you can make more informed decisions driving your company to become increasingly healthy and well performing. For example, to assess the health of companies in industries such as Oilfield Services we can look at a KPI like EBITDA. This KPI indicates a company’s performance without factoring in financing/accounting decisions, or tax environments, so it is a great accurate measure of a businesses’ health. Therefore, by benchmarking EBITDA across industry averages and competitors you can gauge how healthy your business is compared to others in the industry. With this new financial intelligence you can then make appropriate changes to increase the health and success of your company.
3. Revive and energize your practices
Are you constantly worried that your business will “die” or might already be “failing”? If so, you’re in luck. With the help of financial intelligence, you can revive your business much like a new pair of socks can revive your mood. Let’s say your business has hit a dead end, revenues and sales have plateaued (and in some cases may be decreasing) and costs seem higher than ever. Along with investigating your processes internally, benchmarking externally against your industry can lead to more valuable financial intelligence to help with diagnosing your problem and making key decisions to revive your business. By comparing information externally, you can see if your company is doing something different than your competitors that may be negatively affecting your business. For example, if your current ratio is much lower than the industry average, you may want to investigate potential causes. Some of those causes can even be in unexpected areas, such as poor inventory management.
4. Keep your processes fortified (find weaknesses/where you’re lacking and eliminate them)
With the additional insights you can gain from financial intelligence, you can fortify your business processes. We live and work in the real world, and because of this, businesses will always have shortcomings and weaknesses. However, there are ways to improve them such as by monitoring different financials in your business through financial intelligence (often obtained by benchmarking). One example of this is gross margin. Thus, by monitoring your gross margin you can see how much your business retains on each dollar of sales to service its other costs. Gross margin also relates to other elements of your business, such as your production efficiencies. By measuring and benchmarking it, you can see if you’re below or above the industry average, allowing you to take appropriate action to fortify your processes.
5. Create an exhilarating/surprising change
With financial intelligence, you can make more informed decisions and gain insights leading to potential competitive advantages for your company. This often leads to exhilarating change in many areas of your business, including those you wouldn’t expect. For example, if you were to find a problem relating to your debt to equity ratio performance, you ideally would diagnose the problem, make key decisions to solve the problem, and then experience positive change in your business. However, you may also experience other positive changes such as increases in employee confidence and competitive advantage.
Now that you can see how financial intelligence is more refreshing than new socks, consider looking into benchmarking your key financials in platforms such as Intelfolio to gain and maintain that refreshing feeling.