Data Quality: Why It Is the Cornerstone of Your Business Success
Garbage in, garbage out. Data quality is key. We live in the age of information, and ignorance is a decision. With more and more integrated data systems (accounting / CRM / POS) available, understanding business metrics has never been easier, yet never more challenging.
Technology is meant to solve problems, reduce manual inputs into red ledger books, and remove manually typing data into an accounting system. Accounting systems have the ability to easily present almost instant visibility of business performance and financial position.
Gone are the days of taking 15 days to ‘close the books’……..apparently. Therefore, why are businesses still taking as long, if not longer to close the books, despite technology?
Simplify to Amplify – 80/20 front and centre
In the quest to achieve increasingly detailed data for analysis, ‘analysis paralysis’ takes over and the quest to chase the unicorn metric distracts from the 80% of information needed to actually manage the business. Part of the operational challenge is to understand that micro-level data is often not what needs managing to ensure business remains on track.
Consider an F18 fighter pilot controlling a dynamic, performance driven machine. Their cockpit has 5 key sections containing hundreds of instrument hydraulics, radio frequencies, oil pressures, oil temperature, weather and weapons guidance systems as well as a host of others. Are these ALL used every minute whilst controlling the aircraft on the heads up display? Not at all. Fundamental instruments include airspeed, altimeter (height) and artificial horizon (are they upright?).
Three instruments – that’s it! That’s all that is needed to ensure the aircraft is stable. Critical system tracking allows the pilot the time to focus on other tasks as needed.
Keeping your business metrics simple, focused and disciplined streamline your processes to deliver success consistently.
Like flying a fighter jet, knowing the key metrics that you should be able to count on one hand is key. Being aware of how many international buyers frequent your website may be an interesting stat, but for an Australian business it is unlikely this needs to be front and centre to ensure profitable months. Have this as a blip on the world map of sales locations, however stay focused on the bright red heat maps surrounding your key customer locations.
When you simplify, you can amplify your performance reporting by improving the speed and delivery of your financial reporting.
Quality Data
The next element to consider when simplifying is to ensure that you can consistently achieve the right data quality. As the old saying goes, garbage in, garbage out. Changing data streams, modifying data tables, and varying the type & location of your data introduces variability and increases the risk of misrepresenting your true performance.
If you’re struggling with where to start, core cash flow is your target. Revenue is vanity, profit is sanity but cash is king. Cash is also an easy metric to obtain (bank statement) and the results at month end in your performance should be binary, you either reconcile or you don’t. With a correctly setup accounting system, tracking this metric should be easy to manage and achievable at a click of a button.
Once cash is sorted, start by incorporating new data feeds. Include data where quality can be absolutely guaranteed. This may include obtaining the number of transactions that occurred last month, or perhaps what key customers paid you last month. By only allowing data you can guarantee you will formulate the reporting methodology that builds trust and reliability. You will have confidence to make decisions off key metrics that drive change.
As you introduce further data streams, ensure that reconciled quality is not compromised, and aim for consistent delivery of performance reporting within 5 days post month end.
Dashboards
Once you have established your core reliable data, the next level is to build in dashboards – ideally automate from key systems. As Peter Drucker’s saying goes, “What gets measured gets managed”. Without regularly reviewed reliable data, it’s impossible to ensure you’re performance is trending correctly.
Dashboards, like our F18 cockpit, need to be front and centre to show position and performance of your business, identify key risks of off-track performance and, point you in the direction of your next investigation.
Dashboards should be colourful and in line with traffic light colour schemes (green = good, orange = warning, red = off track). They should highlight the key metrics of your business performance e.g. invoices raised, gross profit, lead funnel, and potentially working capital position.
If your core CRM or Point of Sale cannot incorporate a dashboard system, investing in something custom built through a Microsoft PowerBI type solution can not be overstated.
Unreliable and Important Data
Occasionally during reporting there may be a need to delve deep into data that contains inherent weaknesses. The CRM may not be managed correctly, the descriptions may not be up to scratch, the flow of data may not be what you need etc.
If these data elements are pivotal to understanding performance, it is important to iron any wrinkles out. It could be as simple as incorrect email addresses within the database creating communication gaps, or bridging services performed that haven’t been properly invoiced.
By including these elements regularly within your reporting (ideally daily on the dashboard) can be a sure-fire way to steadily improve quality.
Within ‘Atomic Habits’ by James Clear, he discusses that habits should be concentrated down into 2-minute exercises to trend in a positive direction. Improving data quality by 1% each day has the potential see data quality improve 13 times over one year from when you start the journey. Conversely, if data quality is allowed to slip, and has a 1% deterioration over the same period, data quality will only be 7% of the quality it is today.
The end goal is simple – start tracking important data and make a steady 1% improvement each day. Quality is guaranteed.
Why should we care about this quality?
What is your definition of success?
Start with the end in mind. Once you have your ‘Why’, success means ensuring your trend and direction is aligned with growth.
What you’re ultimately targeting for your company will be very team dependent and culture dependent. Understanding your end goal and considering the elements that make up key success is pivotal along this journey. Once established, focus on ensuring quality within your systems and data flow.
Remember, data quality is a journey and should be considered a vital part of a company culture. In the age of information ignorance is a decision, it’s your responsibility to own your information space.
Report on your key data frequently, build this into your habits of success and company culture and never compromise.
