CRM: What is Customer Relationship Management and Why You Need It

We can categorize customers and prospects in profitability tiers by linking them to demographic data and purchasing information. However, this is only an analytical view of clients, treating them as resources for our selling efforts. We can yield much better results if we treat them as human beings looking for genuine and more personalized interactions. As our business grows, keeping all our customer data in spreadsheets and shared folders becomes a task that is tedious and prone to error. Critical Read more…

Regression Analysis in Financial Modeling

Regression Analysis represents a set of statistical methods and techniques, which we use to evaluate the relationship between variables. These are one dependent variable (our target) and one or more independent variables (predictors). We have three primary variants of regression – simple linear, multiple linear, and non-linear. However, most of the time, we use linear regression models. Non-linear models are helpful when working with more complex data, where variables impact each other in a non-linear way. Regression Analysis has many Read more…

What is Business Intelligence and Why Your Company Needs It

In the modern world, reporting is an essential part of running a company. But reporting only allows management to react to what has happened. There’s no outlook for the future. If our business only does reporting, we are already lagging behind. Business Intelligence can help us have smart reporting that gives insights about decisions that can positively influence the future. BI is a mix of technology and strategy within the company, which aids the data analysis of business information. Business Read more…

How to Analyze the Accounts Receivable Turnover Ratio

The Accounts Receivable Turnover ratio (AR T/O ratio) is an accounting measure of effectiveness. It is also known as the Debtor’s Turnover ratio, and we use it to gauge how effectively the company manages credits they extend to customers and collection. We calculate the ratio by dividing net sales over the average accounts receivable for the period. Managers often pay more attention to sales and margins and not enough attention to their accounts receivable and collection. We can’t run a Read more…

How to Perform a Cash Ratio Analysis in Excel

The Cash Ratio represents a measurement of the liquidity of a company. It evaluates the ability of the business to cover short-term obligations with cash and cash equivalents alone. It is particularly useful to creditors when deciding how much money they are willing to loan to a company. Suppliers also consider the ratio when assessing the optimal credit terms to provide to a client. The Cash Ratio indicates a business’s value in a worst-case scenario when it’s about to go Read more…

How to use the Asset Turnover Ratio

The Asset Turnover Ratio measures how efficiently management uses the company’s assets to generate sales revenue. The ratio compares the amount of net sales to its total assets. It’s a standard efficiency ratio, as it gives investors an idea of how well management runs the company. What is the Asset Turnover Ratio The ratio, also known as the Total Asset Turnover Ratio, can determine the company’s performance and an excellent indicator of management’s efficiency. We usually calculate it on an Read more…

Vacation Days and Unused Paid Leave Accrual

When a company hires employees, they provide it with services. In turn, the company, as their employer, reimburses their time spent with a remuneration package. This usually consists mostly of a salary but can include various other benefits, some of which may be mandated by law or local legislation. One of those benefits is the annual paid vacation. IAS 19 Employee Benefits IAS 19 provides guidance on the matter of accounting treatment for such benefits. It requires that we match Read more…

How to Perform Net Realizable Value (NRV) Analysis

Accounting standards (IRFS and US GAAP) require that we apply a conservatism principle when we assess the value of assets and transactions. The Net Realizable Value (NRV) is the amount we can realize from an asset, less the disposal costs. The most often use of the method is when we evaluate inventory and accounts receivable balances. Companies usually record assets at cost (how much it cost to acquire the asset). Sometimes the business cannot recover this amount and must report Read more…

Obsolete Inventory and How to Deal With It

Most companies in the manufacturing and retail industries have Inventory. Slow-moving and obsolete Inventory can have a severe adverse effect on the profitability of the business. When we can’t realize our goods on hand, they lose value and may become useless for the company. To account for this decrease in value, we write down or entirely write-off such items in our accounting records and recognize a loss. Slow-moving and obsolete Inventory can become a significant problem for many businesses. This Read more…

Accounts Receivable Aging Report in Excel

The Receivables Aging (or Ageing, if you prefer British English) report is a tool that lists all unpaid customer balances by pre-defined date ranges (buckets). It shows the relationship between open invoices and their due dates. It is the primary tool to determine overdue balances for collection. It’s useful for the company’s management, as it helps to evaluate the effectiveness of the credit control function. Typically, we separate the outstanding balances in buckets, at multiples of 30 days. Doing so Read more…