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A concept that has recently been drawing the attention of business leaders is business intelligence. To provide an example of this kind of analysis, let’s take a look at the work processes of a doctor.
The word “diagnosis” normally is used in medical vocabulary. When a patient goes to a doctor’s office complaining of pain, he or she gives this professional some information. The doctor, in turn, may ask for clinical exams which will provide even more information. After this, the professional interprets the data and arrives at a conclusion to resolve the patient’s problem.
Can you imagine what it would be like if your business could use an information analysis process with this quality and organization? This is what business intelligence has to offer your company: a precise diagnosis.
What is Business Intelligence?
Your company’s processes can be optimized, which will generate savings and improve quality as well as productivity, but to do this it’s important to have access to the data that they generate.
It’s not very efficient to talk about “improving processes” when you don’t know what needs to be improved. To do this, the first step is to correctly analyze information related to your production activities and cross-reference this data with other analyses such as: the market and the cost of each process or even the impact that it has on the product’s final price. All of this is possible with Business Intelligence.
The language of entrepreneurship is written in numbers, and the most important thing is to understand them. Automating this task means that precise reports are always in the hands of business leaders, helping them make changes with a minimum chance of making a mistake.
How does it help your company?
Systems such as Business Intelligence can help different aspects in a company. Here we selected the main benefits of this tool. Learn about it!
Foreseeing trends
ERP software, which monitors a company’s processes, can offer a forecast of market trends. This is because this data is analyzed together with a collection of information, including market data.
That being so, your business can foresee, for example, the need to invest in the hiring of employees, because it already has information that includes a forecast of an increase in sales.
Create realistic targets
Market analysis which ignores internal factors will not deliver results for your company. In this scenario, a business leader will question why his or her business has had little growth if the sector has done well overall.
To help a company establish efficient targets, Business Intelligence presents reports that take into consideration your business’s real situation, giving the entrepreneur the chance to prepare the company for the current market scenario.
Take advantage of transparent data
Credibility attracts investors and ensures solidity for any company, but to establish this, it’s very important that the organization receives reliable data.
Business Intelligence, through its automated systems, considerably diminishes the risks of human error and fraud in the generation of information, giving it credibility in the eyes of decision makers and leading to a more reliable and prosperous company environment.
This information can ensure that subordinates will have confidence in their leaders’ judgment when faced with complex decisions, because these leaders will be able to convince them that these decisions are necessary.
What to consider when choosing Business Intelligence?
There are several Business Intelligence tools in the market, so it is crucial to know which one is the best. For this, we must consider some factors, which we will discuss below.
Agility
This type of tool needs to be agile when it comes to processing your company data, and thus, helping to define strategies. Without this capacity it will be very difficult to put the strategies into practice.
Cost-benefit
When looking for this type of tool, it is essential that it is in accordance with what the company can afford. However, understand that this does not mean hiring a service that is cheaper and has fewer functions. It is important to have a balance between the features offered and the price of the tool.
Usability
The user cannot have difficulties in using the tool; the system must be accessible so that no time is wasted when performing the functions. Of course, even in a simple system, the support from experts on the operation will still be needed.
What are the examples of Business Intelligence?
As there are different types of Business Intelligence in the market, we have chosen some examples for you to know. Check it out!
Google Data Studio
Developed by Google, Data Studio is a free tool that anyone with a Gmail account can access. Its user, beyond the system reach, can link it to other Google tools, such as Sheet and AdWords.
Its features include creating up to 5 reports with unrestricted editing or sharing, and quickly collecting and converting raw data into reports and dashboards.
Adobe Analytics
One of the great advantages of Adobe Analytics is that it provides the installation of all marketing channels, diagnostics and segmentations in real time. This entire process is rich in detail, and it is even possible to determine the target audience for the campaign.
It also offers a system designed for automation, so it is possible to create alerts at any time. In addition, it features basic functionality such as reporting, sharing by email and mobile devices.
Microsoft Power BI
The main highlight of this Business Intelligence system is its ability to quickly develop dashboards and reports. To get an idea, it is possible to generate one in five minutes.
In addition, it is a system that authorizes the connection with other tools, such as Excel, Google Analytics, Mailchimp, SharePoint, and even Facebook. Microsoft Power BI provides users with broad access to company metrics, as well as real-time updates and accessibility across devices such as PCs and smartphones.
Tableau
With the purpose of making data accessible, Tableau offers a system that values usability. As such, it is a tool compatible with sheets, Hadoop, SQL database and cloud.
However, despite all this compatibility, the main highlight is its VizQl system, a service that allows dragging and dropping any existing information into the reports or dashboards produced. Thus, the user can easily organize the information at any time. In addition, it offers an online platform that allows access to data from anywhere.
Why is it important to be careful with Business Intelligence?
While Business Intelligence is very useful in your company data organizations, you need to be very cautious about using this technology. Contrary to what many people say, BI cannot and should not be viewed as the only analytical technology available in organizations because, despite its efficiency, it can provide misleading data for decision making.
In this circumstance, a deep analysis of the data origin is essential before making decisions based on what the Business Intelligence presents. Information on costs, expenses, and their impact on processes, products, services, channels, and customers are good examples of information that is not available in organizations.
Therefore, they require special treatment by pre-modeling, that is, an efficient cost and result treatment is necessary in a system apart from BI, so that the analyzes are actually effective.
Thus, an efficient modeling has its own nuances and requires special treatment before generating reports and analyzes. After all, many of these documents may even contain untruthful information and jeopardize the opinion of managers at the time of decision making.
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A company’s patrimony goes far beyond its results and its profitability. Its assets include, for example, machinery, real estate, investments, etc. All of this can be transformed into capital, which can help your company invest or pay creditors. Knowing this, it’s very important for a business leader to know how to calculate the liquidity ratio for each of your company’s investments.
This article will explain more about this topic, which is fundamental to the financial health of any company. Let’s get started?
What after all is a liquidity ratio?
It’s a financial indicator that shows how many resources a company has. This makes it possible to understand how much debt your business can withstand. Every investment has a different degree of liquidity. A building, for example, has low liquidity, or in other words, it isn’t possible to transform it into capital quickly.
In order to calculate a liquidity ratio, a business leader needs to consult the sum of a company’s resources. This way it’ll be clear whether the company has enough assets to honor its obligations. A company can perceive that it doesn’t have enough solvency to expand its operations, for example.
The greater a company’s liquidity, the greater it’s financial health. For example: if the result is greater than 1, this means that the business has a good capital margin, and can pay its debts without compromising its investments.
If the result is very close to 1, this means that the company has just enough to honor its debts, and will not have any resources left over after eliminating them.
If the result is zero — or lower— this means that the company doesn’t have enough to pay its creditors. This is a preoccupying situation.
How do you calculate the different types of liquidity ratios?
There are basically 4 types of liquidity ratios; here we will explain how you can calculate them. Continue below!
Current ratio
The current ratio focuses on the short term. That’s why to calculate it you need to consult the company’s current assets and its immediate financial obligations.
The formula is as follows: current assets / current liabilities.
Quick liquidity ratio
With an even greater focus on the short term, the quick liquidity ratio excludes your product inventory, because this calculation just considers the resources that your company already possesses. The quick liquidity ratio is therefore lower than the current liquidity ratio.
Its formula is: (current assets – inventory) / current liabilities
Cash asset liquidity ratio
Unlike the other liquidity ratios that we’ve cited, this calculation doesn’t take into account current assets, but just the financial resources that the company already has, or in other words: the company’s bank balance, cash and financial investments with immediate liquidity.
We calculate it by using the following formula: available assets / current liabilities
Caution must be used to analyze this index. Having more money in your bank account than your current liabilities is not always a positive thing. Depending on external factors such as inflation, these resources can lose their value.
Overall liquidity ratio
With a focus on the long term, the overall liquidity ratio takes into account the resources that the company already has, as well as those that will come. The same is done for the liabilities. The data necessary to calculate this index is found in the balance of your company’s patrimony.
Calculating it is simple: (current assets + long-term assets) / (current liabilities + long-term liabilities).
As we have seen in previous topics, liquidity ratios are extremely useful tools to understand if the enterprise has sufficient resources. However, attention must be paid when monitoring them so as not to make mistakes.
In addition to knowing what they are and how to calculate them, you must understand well the methods behind this type of evaluation. In many cases, the financial department is responsible for doing this initial analysis of the ratios. It will also create the financial reports that will help complement the monitoring.
What is important at this time is to group this information with the data taken from the ratios, always focusing, of course, on the indicators that are related to the company’s current goal. For example, if it is a short-term goal, current liquidity ratio, if long term, overall liquidity ratio.
Thus, with the data grouped and organized, it is time to make comparisons with old information and with established goals. Here is the chance to assess whether the company is better than before or if it has achieved its growth goals.
An important point of this monitoring is that the more automated the process, the better. Using management software is the most appropriate alternative if the goal is to make this monitoring mechanism more intuitive and practical, including in data collection and comparison of indicator results.
In general, business management software, including indicator management, can bring several benefits to the company. In this topic, we list the three main ones.
Imagine a company that has a considerably great pace of inputs and outputs. Now think that the monitoring of its finances is done only by employees, without any technology.
It is undeniable that there is a great probability of errors occurring in the collection and analysis of information. It is also an activity that will take up unnecessary time that could be used for another activity.
With management software, in addition to the time optimization, as everything is done in a programmed way, the possibility of errors is null. After all, the efficiency in collecting and monitoring data is done in an automated way, saving employees’ energy and directing them to pay attention to what really matters.
For a company that does not have software to aid in its financial management, the cost of taking care of its management while also monitoring its behavior is very high. This is because it will need to hire more manpower to manage and collect data, in addition to dealing with employees.
However, by acquiring software, in addition to automating this process, there is a reduction of expenses, since it is no longer necessary to hire people. After all, it will do all the activities quickly and efficiently.
By acquiring management software, the company will have access to different data. As we explained earlier, it will be crucial for the correct collection and management of this information.
That way, it is possible to be aware of how the business behaves and to understand what needs to change for the enterprise to improve, knowing exactly what are the strengths and weaknesses of company’s strategies.
Well, this article has tried to shed light upon what the liquidity ratios are and how you can monitor and calculate them. Do you want to keep learning with our exclusive content? Then subscribe now to our newsletter!
As markets are becoming more and more competitive, managers need to find ways to make their processes more efficient and achieve better results.
The concept of Lean Six Sigma and the benefits it brings have arisen to help companies in this aspect. Keep reading this post to find out more about this topic!
To better understand what Lean Six Sigma methodology is, first we need to understand the separate concepts of what is Lean and what is Six Sigma:
Lean Six Sigma is a combination of both philosophies which seeks to achieve excellence by optimizing processes and reducing waste. This concept has arisen due to the desire of companies to make their operations more agile and efficient.
Lean Six Sigma can be applied to any company that‘s seeking to maximize its results and make its operations leaner and more precise. However, the first step in doing this is to be aware that you’ll have to break paradigms and you’ll need to be willing to do this.
The change begins with the mapping of your processes. In addition to evaluating your activity flow searching for errors and waste – to eliminate them – you also need to understand how a company creates value for its customers.
When the creation of value is defined, this is when you should identify which steps in each process don’t contribute to this goal and eliminate them, adjusting your work methods so that your operational performance doesn’t suffer.
The focus should be on improving processes and avoiding waste, which can be characterized as:
In general, the goal is to implement this philosophy in your company and create conditions that will ensure that the correct materials are used, in an appropriate place, in an ideal quantity – always avoiding accumulations of material and losses and correcting process failures as they occur.
The adoption of the Lean Six Sigma methodology offers various advantages for your company in terms of production and your overall results. Among these benefits, we can mention:
Applying Lean Six Sigma takes time, but it’s relatively simple and it will bring your company closer to achieving excellence in its activities. In addition, with all the improvements made, it’s safe to say that it will also provide you with a competitive advantage.
