In Part 1 of this mini-series, we explored Data Security Risk- the risk that nefarious third-parties could steal your Clients’ personal and confidential data from your system, and what you can do about it.
Today, we will take a brief survey of your Data Accuracy Risk. This is the risk that your business financial records are not giving you accurate information about the true performance of your business. Ask yourself the following questions:
- Do I know what my actual Gross Margin is, and what it should be – and if it is not what it should be, can I explain why?
- Do I have reliable numerical data that tells me whether each of my key employees is profitable?
- If so, how am I using that information?
- If not, how do I know if, individually, each of those employees is over-paid (creating financial strain on my business) or under-paid (creating risk of motivation loss or, even losing the employee to better pay elsewhere).
- If my business is not adequately profitable, do I have reliable financial reports that will show me whether I need to cut staff, or whether I need to change suppliers, or whether I need to pump up sales, or all of the above? (Or none of the above?).
- Can I explain the difference between my Net Profit and my increase/decrease in Cash to my senior managers, or to my banker, or to outside investors…can I explain it to my spouse?
- Are my business financial statements accurate enough to make it relatively easy to sell my business if I choose to do so?
We don’t need to score this survey – you know your own answers to these questions. You could probably make up some key questions of your own. If you find yourself often answering “no” to questions like these, you are running high on Data Accuracy Risk, and it’s time to speak with your trusted business advisor about how to reduce that risk.