This is Part 4 in our “Know Your Numbers” series, which will help you read your financial statements, better understand the numbers that drive your business and ultimately make better decisions.

In Part 3, we discussed key performance indicators (KPIs). Once you create a set of KPIs to measure your company’s effectiveness, you’ll need a system to capture those metrics in an honest, accessible and meaningful way.

Identifying and using key financial numbers in your business informs and confirms some of the real emotions you feel daily. For example, you might find yourself working through a heavy workload and dealing with many important decisions. You feel busy and might wonder if it’s worth it. (You might even wonder what “it” is.) Without a way to track your time, look at your costs and analyze revenue, you have to make decisions based off gut instincts. But with a good system in place, you have helpful feedback that can shape your future actions and give you more confidence in your decisions.

As you develop KPIs, think about how you will measure your progress in achieving those goals and objectives. Here are some of the most common systems businesses rely on for capturing financial information and making sound decisions.

Core accounting systems

This is the backbone of your financial feedback system – a requirement for any business, no matter the size. Whether you record your data for investor reporting and accountability, bank loan covenants or simply to file your tax returns each year, you must have a system that captures your basic accounting information.

Accounting software has come a long way over the past 10 years. Gone are the days of waiting weeks or months to compile your historical business transactions and generate a basic financial report. Today’s cloud technology and beautiful accounting software systems like Xero make basic financial data more accessible for business owners and operators, and provide an excellent tool to support decision-making.

Business management systems

These are sometimes referred to as practice management systems or business operating systems. A well-organized business management system captures and handles the many day-to-day transactional and workflow activities for your business.

For instance, many businesses use a CRM (Customer Relationship Management) system like Salesforce or HubSpot to track leads throughout the sales funnel, store contact information and manage communication in the sales process.

Workflow tools are also popular business management systems. These tools document key business process workflows (e.g., how to onboard a new customer into your CRM system, or how and when to communicate certain information to others in your business). Workflow systems are often designed for specific industry needs. For example, a graphic designer might use a project management system like Trello or Basecamp to manage their workflow, while real estate agents might rely on a system with marketing automation and lead generation features, such as Infusionsoft or Contactually.

Financial ratios systems

These systems measure crucial metrics that indicate your company’s financial health:

  1. Return on investment
  2. Liquidity
  3. Leverage
  4. Operating efficiency

If you have a robust accounting system, you can use that system to calculate these ratios. Tools like Spotlight Reporting and Cyfe also integrate with accounting systems to share your ratios in beautiful reports. If you don’t have systems like these, don’t stress. A simple Excel spreadsheet will do.

Having a system in place is more important than the type of software you choose. It takes focus, time and a keen attention to detail to set up these systems properly and ensure they provide the feedback you need. But with a reliable, accurate way to track progress, you can feel more confident in your business decisions and give your company a competitive edge.