How business owners smell trouble with data

When I joined my first e-commerce job in Gurgaon, I saw a lone man sitting in front of a really large computer, furiously typing away at a light green screen. He seemed to be deep at work, poring through numbers and efficiently moving between screens, hardly even looking at his keyboard. He did seem like a guru, and there were a lot of digits on the screen - I felt like he knew a whole lot more than me!

I soon came to know that the green screen was actually Tally ERP9, and at the press of a key, it showed users a lot of apparently very valuable information. I could see the accountant try and make sense of the situation, and our owner asking him for a slice of data - a different slice each day. It seemed to be an internal source of a lot of company data that seemed to be defining the owner’s next actions.

To me, this looked like a gold mine.

I soon enrolled in a Tally ERP9 course where a teacher taught me how to book a sales, purchase, receipt voucher. Not knowing accounting, I didn’t really understand why every voucher needed so many inputs, but after 7 years, I have realised that an accounting tool requires the RIGHT data inputs to be put at the RIGHT place, so that P&L, Balancesheets can be generated instantly.

Did you know that a trial balance will give you all the transactions, both balance sheet and P&L based? By having a trial balance of any company, you can drill down to every transaction and understand which ones created revenue versus which ones consumed cash. By knowing this information, it is possible to understand where you will need money next. Typically, cash is needed to:

1. Buy more inventory

2. Pay salaries

3. Manage sales until the e-commerce marketplace makes payouts

In my experience, I have seen business owners struggle with strategy. A lot. But I have also noticed patterns: there are really only 2 main questions waiting to be answered:

a. Where do I need to put more money to get a 2X in cash flow today?

b. Is there any money I can take out today without hurting the business?

Everything boils down to these 2 questions only. There are some very clear signals indicating ill health or wellness - either the business starts spinning cash to last for at least 3-4 months or the business needs money every month and the owner needs to plan for how to get that money in. And this, is the clearest sign of business decisions being made with clarity.

If you are an e-commerce business, just answer these 2 questions - 'where do I put my money to generate >2X returns' and 'can I take out money to keep it running as is'. These guiding questions will help you invest right from the start and get rich!

Read more on small business and profitability: