Running the Number$ in the COVID Era

Surviving in the COVID-19 era calls for a rethink on your financial reporting.

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The global pandemic for all its challenges has given us amazing clarity and insights into our businesses. Many ways of doing business in February 2020 became obsolete a month later as we all began working remotely and adjusting to our customers’ needs. The analog and in-person processes that we had relied upon for so many years were quickly replaced with digital and contactless equivalents. Other activities we engaged in previously seemed unnecessary all together — like printing or copying documents.

The pandemic also quickly exposed weak businesses. If a business had slim margins, was losing market share, or lacked adequate capital, the pandemic accelerated its fate. Months earlier, these problems could hide in the shelter of top-line revenue or positive cash flow. But when the tide went out, these companies were exposed by a sudden lack of customers or change in consumer habits.

Let’s shift our attention to the companies that have managed to survive. If you find yourself in that enviable group, plenty of challenges remain, even if your business is growing.

The current marketplace demands agility and keen awareness of the ever-changing drivers of success for your company.

In order to get the actionable insights you need to steer your company toward success, one resource you should look to is your financial reports.

In small and midsized companies, we take what we get in terms of the financial reporting that our accounting team provides.

Often, that takes the form of traditional financial statements: balance sheet, income statement, and maybe cash flow.

But in today’s environment, there’s too much at stake to stop there.

Trended data

This one is pretty obvious but a missed opportunity for many companies. Your accounting system has a wealth of historical data. Simply seeing a monthly trend in revenue or gross profit by segment over the last 12 months could tell you a lot about shifts in your product mix and profitability.

What about combining that with invested capital by segment over the same period? As you consider the return on investment by business segment by period, this might give you a better picture of where you need to direct future capital within your enterprise.

Operational data

Often, data from operations lives in a separate silo from finance/accounting data. Bringing the two together in the same report could help you see your business in a whole new way.

Building on our 12-month trended data series above, consider adding some of your key operations metrics over the same period: occupancy, average sales price, number of units sold, number of customer acquisitions, etc. Seeing the interplay between your operational metrics and how those contribute to the bottom line could be very insightful.

Benchmarks

Industry benchmarks are another helpful datapoint. You could be profitable but losing market share due to efficiencies or innovation you didn’t realize you lacked.

Integrating benchmark ratios or other measures specific to your industry alongside the same measures for your own company could help you see how you stack up in the marketplace and better recognize opportunities and threats.

Data visualization  

One challenge common to the world we live in today is not a lack of data but so much data it can be hard to boil it down to meaningful insights.

With time being so precious, using data visualization to lead you to the conclusion or observation is much more efficient than pouring through numbers on reports.

There are many great ways to visualize your data. It can be as simple as a pie chart showing you a breakdown of your overhead costs or maybe a scatter plot chart of your different product lines considering a couple of different performance measures or ratios.

Another great way to visualize your data is by looking at your operations geographically in map form. As you survey your company’s holdings, you can see which locations or regions are experiencing success versus others that are struggling.

Jeremy Sweek is a CPA and is the managing director of real estate services for Burgher Haggard. He is writing this column for the Fort Worth CPAs, a regular contributor to Fort Worth Inc.