We talked about measuring and monitoring. The third step in the business financial management cycle is analyzing. Analyze always begins with asking “why?” - sometimes over and over again until you get to the heart of the underlying cause. 

How do we figure out the answer to that why?

In the last segment we talked about monitoring versus a benchmark or trends. When we see that gap, we’re going to calculate variances to those benchmarks (the difference between the two). We look at what it is, what it means, and why it’s there to try to determine the root cause. There’s an unpeeling of an onion a layer at a time to reveal the root cause as we continue to ask why. 

You have data in your business, and the answers are in it. You just have to collect it and start figuring out the answer to the why question. When you analyze, you can go back and grab any data set that may lend itself to an answer. Always, when we do analysis, we want the data to reveal the story behind the numbers for whatever you’re looking at, whether it’s the balance sheet or common ratios or the income statement. By going back and understanding what those different numbers have to tell you about performance, you’re going to get a better picture of what’s going on. 

Remember, the foundation of this is your chart of accounts. If your chart of accounts is set up properly, that’s going to lead to consistent, trusted reports you can use as a basis to analyze. You can get your numbers more easily than having to go back and recast numbers and reformat reports. 

Ask yourself: if you go back two or three years, is that data consistently recorded with how you do it today? You need to look back and make sure your data is comparable. Of course, things change over time and your business, hopefully, is expanding. But you can look back and create some benchmarks that will be helpful to your business so you can analyze and understand what to do next. 

Listen to TurboCharge Your Business on the International Business Growth Network or wherever you get podcasts and gain access to even more great resources at https://turboexecs.com/turbocharge. 

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