There is perhaps nothing more dangerous than for an organization to base decisions on inaccurate or incomplete information. Unfortunately, some businesses are doing just that, without even realizing it. There is a smarter way to make business decisions: by connecting operational and financial data.
Gaining actionable insights to improve profitability
In this piece, we’ll share with you why traditional financial statements don’t paint the whole picture of a company’s financial health. We’ll also explore other resources available for your finance team and explain how modern cloud business planning and analytic platforms reveal actionable insights that can have a dramatic impact on your business’s profitability.
The 6 limitations of a P&L Statement
The P&L statement has long been a critical report for analyzing a business’s performance at a certain point in time, but here are some drawbacks:
1. Not enough detail
It might seem like a P&L statement is the be-all-end-all to a business’s health, but P&L statements don’t tell the full story. To get a more holistic view of business health, finance teams need to assess additional information, such as balance sheets, cash flow statements, and operational data.
2. Don’t highlight what to change
P&L statements are important, as they show how profitable—or unprofitable—your business is. They encapsulate the total revenues and expenses for a specific time frame, whether during a fiscal quarter or an entire year. But they don’t provide you with a clear view of what needs to be changed.
3. Cover a specific timeframe
What if you need information for the past few years to compare current information with information from the past few years to make a crucial decision? In such cases, you will need to do extra work by pulling up several P&L statement periods. Consolidating this type of data is nearly impossible with traditional spreadsheets and can introduce too many errors.
4. Provide a historical view of financial events and calculations
The profits contained within the P&L statement report are not absolute. The most unfortunate aspect of P&Ls existing as a past truth is that you can’t easily use this information to predict the future, short-term or long-term.
5. Extensive—and sometimes excessive—back and forth communication
As a finance leader, you probably engage in significant back and forth communication with other departments, which takes valuable time away from your work without offering any guarantee of progress. Static, siloed, and inefficient practices are time-consuming, expensive for your company, and frustrating for you and your team. And without a self-serve process, you aren’t empowered to make better and faster decisions.
Today’s business leaders need deeper answers than traditional finance departments can provide and shouldn’t require finance’s help to get those answers. They need answers in real-time, on-demand.
Every inquiry takes at least two to three rounds of communication to even start finding answers.
6. Lack of transparency
If your finance department is pulling one-off reports for everyone that requests one, there’s not much transparency in your organization. And because finance teams are busy, requesters may be waiting for days to get the answers they need. By then, how many lost opportunities has your business experienced?
These limitations are directly impacting your most critical business decisions. You need tools that enable you to make smarter decisions and realize your full potential.
Gaining actionable insights with cloud-based solutions
Organizations require a flexible, easy to use, and always on business planning and analytics platform. Unlike static, traditional financial reporting tools, dynamic business intelligence platforms give you the real-time details and high-level insights you need to fuel growth and profits.
Business Planning and Analytic platforms turn basic P&Ls into smart statements, making it quick and simple to incorporate data from several sources, such as operational and sales data. These tools offer multiple levels of visibility, ultimately revealing the profitability at the customer and transaction levels. Plus, with everything stored in the cloud, and accessible via a common dashboard, everyone who needs access to financial statements can view them in an instant.
Cloud-based business planning and analytics software from Phocas
Phocas provides a business planning and analytics platform that helps you understand exactly what's going on in your business. Phocas’ comprehensive, cloud-based business planning and analytics software empowers you to leave spreadsheets behind and embrace a single source of truth that is secure and accessible to anyone who needs crucial financial data in real-time.
Would you like to learn more about boosting your profitability with your existing data? Schedule a demo to learn first-hand how your business can benefit from the timely, accurate and insightful financial forecasts possible when you team up with Phocas.