Data analytics has arguably become the biggest gamechanger in the field of finance. Many large financial institutions are starting to appreciate the many advantages that big data technology has brought. Markets and Markets estimates that the financial analytics market will be worth $11.4 billion in the next two years.
Companies in the financial sector aren’t the only ones discovering the benefits of using data analytics for financial management. Small business owners in many other industries are using new data analytics platforms to address many of the financial issues that they are facing. Data analytics can even help them prepare for financial disasters.
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Data Analytics Brings Many Benefits to Small Businesses Facing Financial Challenges
Personal finance mistakes and issues often happen to businesses and business owners. A financial slip-up can have far-reaching consequences. Owners who get into financial dilemmas while running their business needs to make choices. It starts with which bills to pay, which opportunities need to be sacrificed, which partners to leave, and why they skimped on the best business bank account for another with a poor track record.
Good finance habits set entrepreneurs up for success by letting them focus on the growth of their companies. Bad habits steer their attention away from their businesses and deter their ability to expand.
The good news is that new advances in data technology can help deal with these issues. Many companies are using data analytics to mitigate losses due to fraud, identify the best opportunities to invest their money and make sure they saving enough to deal with future issues.
Specific Ways Small Businesses Can Use Data Analytics to Resolve Financial Problems
Here are some of the most common personal-finance mistakes business owners can fix with big data technology.
Fraud risks.
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Small businesses suffer the greatest risks of fraud. The prevalence of fraud is 28%, compared to only around 22% for larger companies. A growing number of businesses are using data analytics for fraud scoring. New fraud scoring algorithms have proven to be highly effective.
Your credit score.
Your credit score follows you no matter how far off the grid you try to run. Personal loans, business loans, credit cards, and insurance premiums all have a dependence on your credit score. Missing payment could quickly result in exorbitant interest rates. Data analytics tools can help you figure out how to improve your credit score.
Services like Credit Sesame use sophisticated data mining and predictive analytics tools to help you better understand the variables impacting your credit score. You can use the information gleaned through their data mining tools to figure out the best way to improve your credit score.
Familiarize yourself with all the different aspects that affect your credit score and use financial analytics tools to monitor it. There’s more than one model that can be utilized to assess your score, but total credit usage, balances, and available credit are the most influential aspects. Learn the contributors to your credit score to let yourself know what measures to keep your numbers high.
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High-interest debt.
Debt in itself isn’t bad, but some debts can turn into nightmares if you aren’t careful. Payday loans and credit card balances carry the same weight as lines of credit. The average credit card interest rate is around 19 percent, while payday loans charge several times, sometimes even as high as 500 percent.
Assess your outstanding debts and corresponding interest rates. Then, start a plan to pay the minimum amount, focusing on the one with the highest rate. When you finish off, be wise in your next loan.
Data analytics tools can help you track your debt more carefully. You will be able to track your debts more easily. Some financial analytics platforms can help you determine the amount of money that you can save by understanding the opportunity cost of paying some debts off rather than others.
Some of the best data-driven personal financial apps include Cleo, Eva Money, Wizely and MintZip.
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Use Data Analytics to Help Create an Emergency fund
There is a substantial risk for entrepreneurship, even if you are on a solid financial footing. Going in without a backup might lead your business to financial issues. Emergency fund lets protect from short-term problems and allow a wiggle room when you have to wait under market distress.
Data analytics technology can also help you understand the best approaches to create an emergency fund. You can use data-driven budgeting tools to identify holes in your budget that you fix to save money. Most bank accounts allow you to search past transaction data, so you can see how much you are spending on certain nonessentials.
Separate your accounts
There are infamous stories about founders pouring their life savings into their dream business and coming out on top – this is rare and not practical for most. Many entrepreneurs fund their companies using their accounts, and that’s an accepted way to start a company. However, depositing funds from your customer’s orders in the same account invites massive financial (and legal) headaches into the business.
Make an effort to open and maintain a separate account through the best bank account provider in your area. Instead of pouring profit directly into your account, consider just giving yourself a salary. Capping your income will give you a better understanding of where your business stands and build up savings for growth and investments.
Data Analytics is Changing the Future of Financial Management for Small Businesses
Data analytics technology is making financial management much easier for many business owners. Improved personal finance leads to better business finance, which ultimately means a smoother ride to the top. Focus on your company’s growth and don’t complicate the matter with missed bills and poor credit by opening the best business bank account that fits your needs. Get your affairs in order, then devote your efforts to company growth strategies. You will have a much easier time if you use the right data analytics and financial management tools!