Financial Analysis Tools
Financial analysis tools can be very helpful to executives of both small and large firms. Specifically, the tools can allow the executive to see where the money has been going on a historical basis and where it may go (or need to go) in the future. This brief paper will explore three examples of how financial analysis tools can be used to assess and improve business performance.
Assessing outflow
Financial analysis tools, such as Peach-Tree made by the Sage Corporation, can help a firm gain a better understanding of monetary outflow. In essence, outflow provides at its core a balance of payments (BOP), which provides data (sometimes illustrated) related to various cost centers (Sloman, 2004). This term is often assigned to foreign transactions or for companies doing business overseas however, it can also apply to domestic organizations. Financial analysis tools that assess outflow also:
• Quantify where money is going and to whom
• Identify trends for a particular business (i.e. seasonal trends)
• Have the potential to identify waste
• Identifying new opportunities
Financial analysis tools, such as Peachtree or for larger firms, Hyperion, can be used to help executives identify new business opportunities.
For example, our organization, 2nd Story Counseling - a Chicago Counseling & Psychotherapy Group, uses financial software to assess trends in consulting needs. If we notice an uptick in a particular type of product as indicated by the financial software, we then have the ability to identify new opportunities in the marketplace. While an accountant may look at a financial analysis report in one way (primarily monetarily), a manager or executive should be looking at the report as a way to identify new opportunities. We did just such a thing at our firm and discovered the need for more couples counseling services in our particular market-space.
Identify waste and increase productivity
A third way that a business can benefit from the use of financial analysis tools can be to identify waste and possibly increase productivity. For example, a firm may notice that they are spending a large amount of money on paper products in the 4th quarter of a given year. This in turn has increased the firms spending, taking away from general profits. A possible reason for the increased cost may relate to the firms hiring of temporary, who did not go through general training on the company's "green policy" of paper conservation. A manager who becomes aware of this can then provide this training to the temporary workers, thereby reducing costs to the organization and increasing productivity via electronic data sharing (Rachman, 2010).
Financial analysis tools should be viewed as helpers for managers. When used properly, the can help to identify waste, increase products and increase productivity. Financial analysis tools need not be large expensive software packages - a tool can be a simple Excel spreadsheet. The idea is for managers to have a device to help inform decisions and create a healthy financial business environment.
Financial analysis tools can be very helpful to executives of both small and large firms. Specifically, the tools can allow the executive to see where the money has been going on a historical basis and where it may go (or need to go) in the future. This brief paper will explore three examples of how financial analysis tools can be used to assess and improve business performance.
Assessing outflow
Financial analysis tools, such as Peach-Tree made by the Sage Corporation, can help a firm gain a better understanding of monetary outflow. In essence, outflow provides at its core a balance of payments (BOP), which provides data (sometimes illustrated) related to various cost centers (Sloman, 2004). This term is often assigned to foreign transactions or for companies doing business overseas however, it can also apply to domestic organizations. Financial analysis tools that assess outflow also:
• Quantify where money is going and to whom
• Identify trends for a particular business (i.e. seasonal trends)
• Have the potential to identify waste
• Identifying new opportunities
Financial analysis tools, such as Peachtree or for larger firms, Hyperion, can be used to help executives identify new business opportunities.
For example, our organization, 2nd Story Counseling - a Chicago Counseling & Psychotherapy Group, uses financial software to assess trends in consulting needs. If we notice an uptick in a particular type of product as indicated by the financial software, we then have the ability to identify new opportunities in the marketplace. While an accountant may look at a financial analysis report in one way (primarily monetarily), a manager or executive should be looking at the report as a way to identify new opportunities. We did just such a thing at our firm and discovered the need for more couples counseling services in our particular market-space.
Identify waste and increase productivity
A third way that a business can benefit from the use of financial analysis tools can be to identify waste and possibly increase productivity. For example, a firm may notice that they are spending a large amount of money on paper products in the 4th quarter of a given year. This in turn has increased the firms spending, taking away from general profits. A possible reason for the increased cost may relate to the firms hiring of temporary, who did not go through general training on the company's "green policy" of paper conservation. A manager who becomes aware of this can then provide this training to the temporary workers, thereby reducing costs to the organization and increasing productivity via electronic data sharing (Rachman, 2010).
Financial analysis tools should be viewed as helpers for managers. When used properly, the can help to identify waste, increase products and increase productivity. Financial analysis tools need not be large expensive software packages - a tool can be a simple Excel spreadsheet. The idea is for managers to have a device to help inform decisions and create a healthy financial business environment.
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