Rethinking data analytics: Why accounting should be the “source of truth” for business success

When it comes to digital insights, businesses often are inundated with data from a variety of sources. From Shopify’s dashboards to Amazon’s sales reports, we’re never far from a data point or a performance metric. Yet, amid this wealth of information, a fundamental gap persists — a disconnect between operational data and a company’s financial performance metrics.

That’s why CFOs, corporate finance teams, and business leaders must rethink their approach to accounting, not as a mere compliance function but as a pivotal component of their data analytics and key performance indicators (KPIs).

Risks of overlooking accounting data

The democratization of data access has allowed businesses to track performance across multiple sales channels with unprecedented ease. However, this ease comes with a caveat: each platform offers its own version of truth, which is often siloed and sometimes misleading.

For example, while Shopify reports revenue based on orders processed, Amazon only does so upon shipment. A company that sells on both platforms risks mixing revenue recognition methods within the same set of books. This disparity can also create a fragmented view of a business’s financial health, leading to decisions that are based on incomplete or worse, inaccurate data.

Many retail and e-commerce businesses tend to focus mainly on customer-centric metrics, such as product sales volume or individual product margins. While crucial, these metrics often result in a myopic view of a company’s performance. This tunnel vision overlooks broader, equally vital metrics — such as overall revenue, gross and net margins, sales tax, platform fees, and others — that together, paint a much more comprehensive picture.

This oversight is not just a matter of missing out on a fuller understanding of one’s business. it underscores a more serious issue: the risk of significant financial discrepancies arising from inadequate attention to accounting data. This can even lead to financial restatements that damage credibility, investor confidence, and market value.

This is where accounting data comes into play. Unlike platform-specific analytics, accrual-based accounting data provides a holistic view of a business’s financial performance. It reconciles revenues with actual bank deposits, adjusts for pending orders, accounts for expenses and chargebacks, and recognizes liabilities like sales tax payable. In essence, it offers the ultimate source of truth — a comprehensive snapshot of where a business truly stands financially.

Further, the potential of accounting data extends beyond reconciling sales; it’s pivotal in generating accurate, actionable KPIs. As businesses operate across multiple platforms, from e-commerce sites to social media channels, platform-specific reporting tools fall short, too often failing to capture the entirety of a business’s operations and often overlooking critical data points that significantly impact the company’s bottom line.

Relying on incomplete KPIs isn’t just a matter of inaccurate reporting — it’s a strategic misstep. Financial insights derived from accounting data enable businesses to make better-informed decisions, streamline operations, and, ultimately, drive growth. By integrating accounting data into daily analytics, businesses can monitor their financial health in real time, adapt swiftly to challenges, and capitalize on opportunities.

Embracing a new mindset and leveraging technology

Leveraging accounting data effectively requires a shift in mindset. Traditionally, accounting is viewed as a retrospective activity — a necessary evil for tax preparation rather than a tool for strategic decision-making.

This perception needs to change. In today’s business environment, accounting should be proactive, not reactive, and as close to real-time as possible. It should inform daily operations, not just monthly or annual sales tax filings. For CFOs and finance teams, this means adopting a more integrated approach to financial management, one that includes automating and streamlining accounting processes to ensure that data is not only accurate but also readily available for analysis.

Not surprisingly, technology plays a crucial role in this transformation. The adoption of cloud technology platforms can automate the reconciliation of sales and payment data across multiple channels, transforming the accounting function from a historical record-keeping task to a source of real-time strategic intelligence. By ensuring that sales, fees, taxes, and other financial data are accurately captured and reflected in the general ledger on a daily basis, businesses can achieve a level of financial oversight that was previously unattainable.

In practice, this approach transforms the accounting platform into a dynamic dashboard that provides not only a snapshot of the business’s current financial status but also actionable insights that can drive growth. From identifying trends in sales and expenses to optimizing cash flow and managing inventory, up-to-date, accurate accounting data offers many benefits.

For example, by automating the flow of e-commerce and retail selling and payment platform data into accounting systems, businesses can gain a clearer understanding of their financial performance, enabling them to make data-driven decisions with confidence. This isn’t just about efficiency; rather, it’s about equipping businesses with the tools they need to thrive in an increasingly competitive landscape.

In a world awash with data, the businesses that succeed will be those that can distill this information into strategic action. At the heart of this is accounting data — the source of truth for business success. With accurate, timely accounting data, businesses can unlock a deeper understanding of their operations, financial health, and market position.