The ability to effectively track and report on revenue and costing is probably one of the pivotal requirements of any organization. But far too often, doing so proves difficult. The ability to report on and analyze your accounting data allows you to really understand the strengths and weaknesses of your business. This is where analytical accounting comes in! So, let’s take a look into analytical accounting, how it could benefit your business, and what role Sage Live can play in meeting the challenge.
So, What Is Analytical Accounting?
Traditionally, financial reporting is either quite basic or extremely manual and time consuming. The usual 3 tier nominal allows you to analyze your financial data against as many accounts as you post against. Depending on your software, you might be able to track project spends and the like. In my experience, any sort of data analysis is usually done through Microsoft Excel, which involves pulling data out, followed by lots of manual manipulation.
On the whole, it is unlikely that you can get a good granularity on reporting. The main focus for analytical accounting is (as the name suggests) tracking and analyzing your financial data on a deeper level. Tracking costs and revenues in a more detailed manner means you are able to investigate specific areas of your business, helping you to identify both what causes you the most problems and also which areas are most fruitful.
What Is the Benefit?
Often, we forget just how powerful our accounting data can be. When you think about your business as a whole, the first question to ask yourself is “How do we measure success?” For many, the answer will be “Profit!” Now, try to think about how you would like to see that broken down across the business. I guarantee, the more you think about it, the more ways you will want to be able to see, measure, and track that success.
The ability to identify which products, consultants, or services generate the most/least profit has in the past only been achievable through either manual tracking or a complex nominal structure. This in turn creates a real headache for those inputting the data. In comes analytical accounting, software that allows you to associate costs and revenue accordingly, giving you the power to delve in to your business as never before.
Getting the Right Level of Data
In order to be able to carry out analytical accounting, you first of all need an accounting system that can track the right levels of data. The critical piece here is the granular visibility of your accounting data. Without this, quality analytics is 100 times harder to achieve.
A fantastic example of software that provides this capability is Sage Live. Sage Live provides a multi-dimensional ledger, allowing you to track revenue and costs by tagging transactions to specified Dimensions. These dimensions can be anything you like, from standard measurements such as Projects, Customers, and Account Managers to your own specific dimensions, like Industry or Service Area. Anything you want to keep track of, you can set up and do so.
Once you have set up your dimensions, you can then create as many tags as you like — these will be what you choose on a transaction. You can even set them up to auto-populate specified other tags! For example, the industry dimensions could auto-populate, given the customer you choose. This means you can analyze your data in any way you can think of, and data entry is still kept to a minimum. Perhaps most importantly, you can then report on these dimensions. Imagine, a Profit and Loss by Product? Amazing!
Once you are tracking the correct level of detail within your financial system, you need to be able to report on that data. There are lots of fantastic reporting tools out there to boost your analytic capabilities. Sage Live comes with not only your standard reports but also Intelligent Reporting, allowing you to create dashboards and reports quickly and easily. With Sage Live’s mobile app, you are able to see these reports and dashboards, including key KPIs, anywhere you like, any time you like.
The days of traditional accounting systems are coming to an end. With the emergence of Analytical Accounting, Multi-Dimensional Accounting, and Cloud Accounting — to name a few — times are changing. The most exciting aspect of this is the powerful capabilities that come with it.