When it comes to the financial side, making decisions will always be more complicated. After all, one mistake can leave the company without resources to operate. But if you want to feel more secure at that time, without taking risks, you can always count on financial indicators for decision-making.
What is the basis for decision-making at your company? And how have you been evaluating the results and management achieved? What, in your opinion, signals that a certain process should be optimizedWell, to analyze, you need to obtain parameters that give you accurate direction. In addition, financial indicators allow you to know how the teams in charge of the company's money are performing and if the strategies adopted are having the desired effect. After all, “what can be measured can be improved.”.
With this in mind, we explain in this article what financial indicators are, how they contribute to decision-making, so that you can better monitor and understand your company's financial health. Understand what indicator-based management is and what advantages this strategy can bring to your company!
Continue reading to learn how to ensure responsible, intelligent, and proactive financial management.
What is management by indicators, and how does it work?
This strategy is based on constant monitoring and evaluation of processes, and aims to enhance decision-making in companies, based on key segment parameters for the market, such as indicators of increasing productivity, profitability, strategy, quality, among others.
It is important to emphasize that, to ensure a true contribution from these indicators, it is also necessary to establish a strategic planning and have clear objectives when defining company goals and metrics. But be careful! It's important that you know the differences between metrics and indicators.
Metrics are raw measurements, values that make up indicators, which in turn allow for a broader and more targeted view. Thus, the quantitative and qualitative aspects should complement each other and be directly related to the company's strategies and objectives. Precisely for this reason, one of the principles of management by indicators is that both also undergo constant review, in order to keep pace with the organization's development and reality, ensuring continuous improvement of results.
What is your importance?
The Financial indicators they have a main and fundamental role: to provide information. Saying that a business sold a certain quantity of items doesn't necessarily mean anything—unless financial indicators are used.
If they demonstrate that these sales resulted in profit and liquidity, then the company is healthy. On the other hand, if the sales were on credit or are part of a default scenario, the result is that the company needs urgent changes.
With this, financial indicators are important because they allow the business to achieve its strategic objectives and also to make the necessary changes to achieve good results. Furthermore, indicators allow for relevant and accurate monitoring of a situation.
In addition to bringing greater transparency to your business, it's possible to make more assertive decisions based on data and statistics, rather than simply relying on hunches and intuition. This way, you avoid taking steps beyond your means, or missing the timing for changes and the right moments to advance!
How to use financial indicators.
For financial indicators to be truly effective, it is necessary to establish a utilization strategy. Thus, the first step is to evaluate the strategic planning your business and recognize your venture's needs. From this, it is possible to identify which indicators are most relevant and indicated for the business.
Start by establishing the relevant indicators and goals for your business, based on an analysis of the mistakes, successes, and results of the past few months and a projection of the objectives to be achieved, with due justification, of course.
You might be wondering then: how to generate these indicators and how to align this information with your company's strategic planning? Well, in this regard, an ERP, capable of integrating your company's processes, can only add value. With an management software, it's possible to have access to more concrete and reliable information about your business, helping you define the right goals and indicators!
Conclusion
Financial indicators for decision-making allow you to assess the stability of your finances and the need to implement improvement actions. Therefore, try to keep them updated and available so that everyone involved can follow them. With these indicators, your decisions will be more assertive, and you will be able to increase your competitive advantage.
Now that you know how to improve decision-making based on indicators, why not put it into practice in your company and boost your results? We have a suggestion for you!
To further improve your results, get to know Stratec's Budget Matrix Software! It enables budget control and analysis at all management levels of the company. The implementation of the matrix budgeting methodology allows for the cross-control of expenses or revenues by account nature and by cost center. It also ensures continuous organizational learning and budget improvement.
When incorporating the method PDCA, the software enables the creation of action plans for cost control or reduction, to increase sales volume or margins, to monitor the execution of action plans, analyze results, conduct detailed deviation analyses, and even perform budgetary re-planning. It is even possible to visualize the practices of the best-performing financial areas to replicate the model.
What does Stratec's MO Software do? Intuitively and simply, this module:
Compare forecast and actual
Unfold and identify the planned and actual budget by area and by accounting account, comparing their results.
Identify the problem
Tracks expense containment and revenue increase plans, allowing for quick identification of areas that have not met their target.
Includes corrections
Records and tracks corrective actions, allowing replanning in a timely manner to ensure goals are met. It also allows for the visualization of practices in areas with satisfactory results in order to replicate the model.
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