What type of statistical analysis do you do to monitor your business success? Statistics is simply the collection, organization, analysis, interpretation, and presentation of data. What type of data do you look at when it comes to monitoring how well your business is performing?
Statistics do not have to be complicated or time consuming or a task that needs to be performed by a professional statistician. Simple statistics can help you ascertain whether your business is on an upward curve, downward slope, or flatlining.
Large and mid-sized companies with dedicated accounting staff create monthly financial statements accompanied with statistical analysis to monitor monthly performance. Each month when management reviews the financial information and their company performance they can adjust what they are currently doing or plan for the future based on the analysis.
Smaller companies generally do not look at monthly performance simply because they do not have the accounting staff to create the reports required on a monthly basis. By time the year-end information is put together it is too late to go back and plan for the future as the future is already happening. So how does a small company incorporate statistical analysis?
Smaller companies do not require the depth of the analysis a large to midsize company needs. Because there are fewer revenues and expenses to monitor and man power is at a minimum smaller companies can create analysis that meets their needs.
Simple statistics can be valuable. Just by looking at the sales from a month to month perspective a lot of information can be acquired. Statistically speaking you could see your highs and lows throughout the year. Does your sales revenue change with the seasons, or when you have sales, does advertising affect your sales, by looking at your monthly sales you can start to predict the future.
In addition to looking at your sales you also want to look at your expenses. There are 2 groups of expenses that can help you look at your financial future. The expenses directly related to the sales – the cost of goods sold and the general expenses like overhead. By monitoring your cost of goods sold and your sales data you can see if the costs directly related to your business activity are maintaining, going up, or decreasing.
Just by reviewing your monthly sales and your monthly expenses you can assess what you can do to change your future. If you know sales typically decline in April you can – accept that fact and do nothing, use the slow time to work on other tasks, take a vacation, or you can do something to promote more sales like advertise. Statistics give you the opportunity to manage your business through knowledge. Even small business can create statistics without the advantage of having a financial department to provide the information for them.