Data Quality and The Impact on Cash Flow
Ask any business owner what their most important financial metric is on a day-to-day basis and the answer is likely going to be cash flow. Big or small, nearly every business faces this challenge. Without cash flow a business can’t pay the bills, and things can fall apart very quickly.
However, many business owners don’t make the connection between the quality of their data and the health of their cash flow. Keeping the quality of your business’s data high can be challenging – it requires a certain level of investment in time, resources, and money. But the impact of not investing in data quality can be tremendous.
But what does it mean when we talk about ‘data quality’, and how is it related to business performance?
Wasted Resources
First, your data could be just plain wrong. Think about invoice or payment data: if you have inaccurate information about who owes you what or who has paid you what, watch out! Not only are you likely to have slow-paying customers who have gone unnoticed, but you might not spot trends that may warrant different credit or lending terms. You’re also likely spending additional time and money on collections; you may even be wasting resources to collect on payments that have been received.
Missed Opportunity
If your customer order or usage data is incomplete you won’t have a full view into how your customers are using your products or services, meaning you can’t make predictions about what they need next. Cross-sell and upsell opportunities are a critical part of growing revenue from established customers. Incomplete data means you’re missing out on these opportunities.
Wrong Targets
Your data might be accurate but not robust enough to provide the value your company needs. For example, consider your prospect database. Do your prospect records have enough of the information that can be helping your sales and marketing team? Do you know the size of the company or its structure? Do you really know what industry each of your prospects are in? Do you know who the CEO is or other decision makers? Do you have enough information about these prospects to make sure that they’re getting routed and assigned to the right salespeople? If not, you could spend time pursuing business that will never materialize or contacting individuals who aren’t in a decision-making position. These actions cost your salespeople time and cut into the revenue potential that they could bring into your business. Your cash flow suffers as a result.
Inventory Woes
The lack of robust data can also create inventory issues. A retailer without accurate product sales data may order too much or not enough of that product. Too much product and you’ve got to find space to store it, increasing your warehousing costs; too little and you risk disappointing customers and losing the sale to a competitor. Either way, you’re squeezing your cash flow. And that’s not good.
Data Should Help, Not Hurt, Cash Flow
Here are a few basic steps that you can take to help keep data quality issues from impacting your cash flow.
- Implement audit, balance, and control measures. A simple system of checks and balances can help to ensure you’re processing the right volume of data and that your key metrics don’t suddenly swing out of whack. For example, if you’ve been handling 100,000 transactions a day, you’d want to know if suddenly your systems only report 10,000. These types of regular ‘sanity’ checks help keep things humming.
- Prioritize data stewardship. It can be tough to address every data quality issue, but you have to start somewhere. Begin by addressing the things that have the most direct impact on your cash flow. There’s a common desire to want to commit to doing all-or-nothing; that rarely works. You can’t boil the ocean. Instead, with the resources you have available, start with the critical pieces and move on when you’re ready.
- Learn from your mistakes. We all make them so we might as well learn from them and derive some value. When something goes wrong, figure out what data might have helped, and set specific goals for maintaining that data going forward.
The first step to cleaner, more accurate, and actionable data is understanding the health of your current data. A free Data HealthScan from Dun & Bradstreet provides a report on the quality and completeness of your sales and marketing data.
Even small steps to build disciplined data management practices can go a long way to help your company grow and thrive using data for competitive advantage.