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What is Internal Data? - Definition & Sources

What is Internal Data? - Definition & Sources
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  • 0:00 What Is Internal Data?
  • 0:52 Sales
  • 1:52 Finance
  • 2:50 Marketing
  • 3:35 Human Resources
  • 4:30 Lesson Summary
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Lesson Transcript
Instructor: Ashley Johns

Ashley has taught college business courses and has a master's degree in management.

The company you work for is losing money but doesn't know why. Sales are high, employees are happy, and bills are paid. It might be time to collect internal data to find out. This lesson reviews where internal data comes from and its importance.

What Is Internal Data?

ABC Coffee House spent a year researching the market prior to setting up business. By going through external information, the company came to understand the costs required to operate and what customers would expect from them. Now that the coffee house has been in business for six months, it is time to start relying on internal data to make future business decisions.

Internal data is data retrieved from inside the company to make decisions for successful operations. This information is important to determine whether the strategies the company is currently using are successful or if shifts should be made. There are four different areas a company can gather internal data from: sales, finance, marketing, and human resources. Each area provides a unique perspective, yet the data connects the departments. Let's review each source of data.

Sales

Internal data is gathered from the sales department to determine revenue, profit, and the bottom line. Understanding these numbers gives a business the opportunity to maximize them. It also provides reasoning to place more focus on particular areas or cut them out altogether. The numbers can be broken down further by analyzing each distribution channel, price point, geographic area, customer type, and salesperson.

For example, a lawn care company is running a special to have a yard seeded at 50% off if the customer signs a contract in the month of April. As the company breaks down the sales by geographic area, it is determined that this campaign is highly successful on the north side of the city, yet failing on the south side. This internal data tells the company to continue this campaign where it is successful and make adjustments to try to improve sales on the south side. In addition, the company should review the salesperson data to see if the issue is a lack of employee training or a geographical issue prior to making the change.

Finance

The finance department should be supplying internal data in the form of cash flow reports, production reports, and a budget variance analysis. A cash flow report shows the amount of cash generated and used within a certain period. A production report shows the cost incurred by the company to produce a product or service. The cost includes raw material and labor. It is typically broken down into cost per unit. A budget variance analysis investigates changes between performance and what was budgeted.

The finance data tells the costs incurred by the company, or how much money is going out. The company needs to know how much goes in and out on a monthly basis as well as the days these transactions occur. This tells management when the best times to order supplies are, and it helps the cost per unit. Keeping the cost down allows the company to price properly and keep profit margins at the necessary level.

Marketing

There are countless ways to track marketing efforts. Unlike other areas of the company where reports are necessary, some businesses do not even realize the opportunities technology provides in the area of marketing. Internal data can be gathered from website traffic statistics, phone reports, promotion codes, etc.

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