FinancialSoft uses industry data to help business that use our services have some guidance to where they stand in their industry. It is common practice to use the North American Industry Classification System (NAICS) Codes created by the US government to identify the business sector where your business resides. (NAICS) classifies business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. economy. NAICS is production oriented (not product oriented) and categorizes businesses with others that have similar methods of production. NAICS codes are averaged against all the industry types in a particular NAICS code.
There are cases where the financial model of one business versus another in a single NAICS code can be quite different. This could result in some of the financial metrics not being relevant to your business. An example would be one business within a NAICS code provides their product or service on a Cash-on-Deliver (COD) basis. This would result in no Accounts Receivable. If another business in the same NAICS code classification were to provide their product or service giving their customers credit they would then have a receivable value in their Accounts Receivable account. The first business is COD would have “0” Days of Receivables whereas the second non-COD business may have 30 Days of Receivable. When the businesses are averaged together the result could be 15 days of receivables as the best in class in this NAICS code. So if your company is a COD business your goal should be 0 days Receivables, not the 15 days the data base may provide for that metric.
Your first report has the goals automatically set for you at the top 10% of your industry’s peers based on the NAICS code you provided. This was done to show you where your company stands against the “Best-In-Class” of your industry. After your first report, you will be presented with a table of these metrics when you log into the system to run your next report. The Goals on the table will be editable so you can adjust them according to what you believe is a reasonable goal for your company. As stated above, there will be circumstances for your company on some metrics where the industry data may not completely apply. This ability to change your goal provides the means to adjust your goal based on your situation. So after you have run your first report, if you find any of the goals not relevant to your financial model, log back into our financial reporting service, adjust those goals, and rerun the report. The report you will now receive will be measured against the goals you set.
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