SUPPOSE YOU ARE HEADING A BUSINESS UNIT IN INDIA WHICH ARE THE POINTS ABOUT STATISTICS YOU WILL KEEP IN MIND FOR DOING BUSINESS PROFITABLY. IN OTHER WORDS WHAT IS THE RELEVANCE OF BUSINESS STATISTICS IN YOUR VENTURE.
AS A HEAD OF A BUSINESS UNIT IN INDIA FOLLOWING POINTS I WOULD KEEP IN MY MIND ABOUT STATISTICS FOR DOING BUSINESS PROFITABLY :
1. Successful Business Statistics
Statistics show up everywhere in business and it is important that they are acknowledged and, at least, partly understood to help manage your business successfully.
Statistics can be seen as an early warning system as they will always give you the cold truth if they are used properly and not with blind faith in your business processes from cash flow to a successful sales campaign.
Business need to show particular attention, as a slight error in judgement or interpretation could spell disaster or, inevitably, failure.
The financial and marketing sides of business are the two main areas that produce statistics and so this is where we will direct most of our attention.
Statistics often give us an incentive to take action as results can be measured, and this is precisely what the article aims to achieve by increasing your understanding and awareness.
2. Using Statistics in Business
Management Accounts
Working out monthly internal accounts (known as, management accounts) is a must for ALL businesses large or small.
Management Accounts are created by entering figures that represent your liquid assets, i.e. those that can be easily turned into cash: debtors, stock /materials, actual cash in bank on one hand.
On the other hand: creditors, loans, taxes. These simple figures will give you a more realistic financial position.
Making financial decisions using your balance sheet (fixed assets to long-term loans) can possess a huge danger, as it does not reflect your current liquidity position. In other words, do you have the funds to meet short-term commitments?
Management Accounts are used for planning to help build cash flow forecasts and budgets. All financial figures should be reviewed carefully as they may not be as favourable as they look.
For example, you may be owed a huge sum of money by creditors, but what if this is long overdue - is it a good cash flow position to have now? Is the cash in your bank, yours to spend? Have you allowed for taxes in your cash flow? I'm sure you get the picture… you need to know where you stand here and now!
3. Analyzing Statistics in Company Reports
Complete a management accounts form to work out your financial position by entering simple figures that also make up your Balance Sheet. Once you start using this simple form you will become naturally capable of doing this monthly task to a high-degree of accuracy.
A word of warning: estimating stock, and any similar tasks you do, MUST be accurately recorded either every other month or quarter depending on your industry and cash flow position.
Company Reports
When it comes to trading with other businesses, it is common to overlook the statistics reflecting their performance capabilities. By doing so, your business can be faced with credit problems having a serious impact on future cash flow.
To avoid putting yourself in this situation, a Company Report can be obtained that reviews the suppliers you use. The report information can then be used to help you make a more confident judgement of, say, a new customer you are about to deal with on a credit period basis (or not confident as the case may be).
MUCH overlooked is the task of obtaining regular (at least annually) credit reports of EXISTING suppliers: doing so will mean less of you saying "I never thought they would do this to me" when they cease to trade and owe you the equivalent of a year or twos profitability. The larger reports have ratios that are easily understood after a little practise .
4 .Using Statistics for Business Analysis
Performance Ratios
There are a number of ratios that can be used to analyze how well (or badly) your business performs in certain areas. For example, lets look at the Current Ratio:
CURRENT RATIO (is) CURRENT ASSETS (divided by) CURRENT LIABILITIES
• CURRENT ASSETS are: debtors, stock, cash
• CURRENT LIABILITIES are: creditors, overdraft, loan repayments for 12 months (see Balance Sheet for more information on assets and liabilities)
Say, current assets = £300k and current liabilities = £200k, the current ratio would be 1.5. as 300 divided by 200 is 1.5. A business should aim for a figure ideally between 1.5 and 2.0.
A figure that falls significantly below this range suggests that the business is in danger of running out of cash, whereas a figure significantly higher than this range suggests that money is tied up in unproductive assets.
For a business to be successful, it is important that you understand which statistics reflect good and bad performance so that corrective action can be taken immediately.
5. Using Statistics in Marketing
Money in the Bank
How much money you have in your business bank account can often provoke actions that are regretted at a later time.
For example, if you have a healthy balance, you may decide to splash out on a purchase or investment that will in time, leave your account dangerously low: when money comes in, it is not unusual for all common sense to go out of the window…a bit extreme you may think!
Planning ahead is the key to survivability - Cash Flow Forecast
"Market Research is an area that is often overlooked by businesses"
Marketing Statistics
Market Research is an area that is often overlooked by small businesses, trusting instincts rather than facts. However, the statistics and information obtained from market research can be influential for making important decisions.
For those businesses that do carry out market research, it is important that statistics are analyzed and concluded effectively to avoid the threat of business failure that can result from poor interpretation.
6 Using Statistics for Sales Purposes and How to Interpret Historical Data
a) Sales
When you sell a product or service, it is important that you acknowledge whether there is sufficient demand to make a successful campaign.
"It is important that you acknowledge whether there is sufficient demand"
This can be largely influenced by your proposed selling price and needs to be researched intensively. Such information can be retrieved from market research, by collecting statistics to determine anticipated demand.
b) Historic Statistics
Secondary research can often accumulate statistics that are not up-to-date (i.e. historic) and therefore may not reflect present consumer attitudes, trends, etc.
This difference between past and present statistics could be the difference between being successful in a decision and not being successful.
Consequently, should you use historic statistics, be sure that you can spot trends or patterns that can help you determine a more accurate figure for the present, to base any conclusions or decisions.
7 . Questionnaire Sampling Statistics
Sampling
Sampling is commonly used when issuing Questionnaires: primary research. If you use primary research to collect statistics, it is important that you sample if the targeted audience is of a large size or covers a wide area: it would not be practical to question everybody!
If using a mail shot, you could target a sample of consumers by sending your information to a certain number of addresses in different areas. Although this approach is not very effective for a good response, a mailing list can be used to sample more effectively by knowing which consumers may have interest in your product/service.
Summary
Statistics can determine and predict the future of your business allowing you to plan for success. It is therefore important that statistics are used in your business and are interpreted accurately to help your business remain competitive and encourage growth and profitability.
Businesses are confronted with statistics every day that are often not acknowledged. This can lead to vital decisions not being made or poor interpretation of the facts. Consequently, your business can face issues that are hard to turn around once acquired and threaten you with failure.
The conclusion refers back to the first paragraph, that the future success of your business is dependant on using statistics effectively.
AS A HEAD OF A BUSINESS UNIT IN INDIA ,I WOULD KEEP ABOVE POINTS IN MY MIND ABOUT STATISTICS FOR DOING BUSINESS PROFITABLY.
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