This article takes 2 minutes to read. It explains how you can use spending data to optimise your budget and relaunch your business. You can also download a FREE spending analysis tool. The tool analyses home spending, but the same logic applies to businesses.
Understanding your spending is critical to reaching your financial goals, safeguarding your lifestyle and ensuring business continuity. This is so especially during and right after the COVID-19 crisis. You need to start by gathering and analysing actual spending data. Then you can create a future plan, measure risks, and establish forecasts.
Whether you are a business owner or a household member, your daily spending or transactional data is the key. As our article “The importance of Point of Sale data analytics” explains, you are sitting on a data goldmine. Point of Sale (POS) data, like customers invoices, are about your income. And invoices from other businesses make up your spending. In turn, multiple source like receipts, accounting software and bank statements offer you access to your spending data .
Analysing both income and expenditure data is important for setting a budget. Evaluating how you may modify them be leading to innovation in your business.
Bridging the gap: spending and income analysis
There are many principles to guide your budget analyses, but we discuss only context and granularity here.
First, context is king. Attention to your data context requires you to think of external factors that may influence it. For example, consider the influence of seasons when evaluating how you spend over time. Christmas season spending may be similar to other holidays, but it may not be representative of “business as usual”. In this sense, you may evaluate your spending over holidays periods and other times of the year separately.
Second, you need to decide how granular you want to analyse your data. Financial advisors may mention business spending categories like real estate, utilities, insurance, and so on. But you could decide to break down spending categories further depending on the purpose of your analysis.
To conclude, you may map out and quantify the relationship between your spending and income. This means understanding how you spend to make a sale, end-to-end, through every process (and even admin time is money). Changing this leads to innovating one’s business models and shifting the cost structure.
The FREE home spending analysis tool
At Indive Analytics, we specialise in fine-tuning your business, including optimising budgets and enabling innovation.