As stated in the last post, NO business is perfect. ALL businesses have room for improvement (even the one posting this article). That's why we're talking about the Business Improvement Cycle, a multi-step process that analyzes where a business is "at", where it's going, and how it's getting there. This week's post will cover the first two steps in the process:
RAW DATA: Step #1 starts with Raw Data. Another way to think of Raw Data is by asking yourself, “What’s in my shoebox?” Receipts, invoices, bank statements, cancelled checks, and all the transactional documentation that comes in on paper, or even digitized, contains the seeds of intelligence; however, when left unorganized and unanalyzed, they convey no meaning.
INFORMATION: Step #2 categorizes, organizes, and compiles the Raw Data into useable Information, and the dual-entry accounting method is the best process to do this. The most common way of organizing information is by creating Financial Reports, specifically Income Statements and Balance Sheets. These are the two foundational tools for fiscal management and improvement that your accountant or bookkeeper will create monthly, quarterly, and annually; unfortunately, many of them deliver financial reports and then think the job is done. But financial reports are not the End of fiscal management, they are just the Beginning.
Tune in next time for "Analyze", step number three in "the cycle"...