Marion Liedtke
12. July 2023

The preparation of a BWA, i.e. a business evaluation, describes the systematic analysis of your company’s business data. Whether for applying for a loan or simply for reflecting on the current situation – the BWA is a valuable tool for assessing the performance of your business. By automating your BWA, you gain many benefits. In this article, learn exactly what the BWA is, what all goes into it, and in what situations a BWA becomes necessary. Also learn about the 5 most important benefits of the BWA, what options are available for creating a BWA and how to get the most out of your BWA using automation and AI.

The BWA is an instrument from financial accounting. It summarizes the business data of an organization. For this purpose, various key figures and ratios are calculated and interpreted to provide important insights into the financial performance, profitability and efficiency of a company. In this way, strengths and weaknesses as well as possible potential for improvement can be identified – the optimal basis for well-founded decisions.

In principle, the BWA is important for companies of all sizes and industries, from small start-ups to large multinationals. It is usually prepared by executives, financial and business experts, and consultants to help a company make strategic decisions throughout its lifecycle. These individuals have the necessary expertise and experience to collect, analyze and interpret the necessary data to produce meaningful results. Meanwhile, cleverly set-up automations can also do much of this work.

Create BWA: What belongs in it?

The exact components of a BWA vary depending on the company and the accounting system. In principle, all figures that you want to compare are relevant. For example, the following factors can be used to create a meaningful BWA:Sales revenue: Sales revenue shows the company’s total income from the sale of goods or services.

  1. Sales revenue: Sales revenue shows the company’s total income from the sale of goods or services.
  2. Cost of goods sold: Cost of goods sold refers to the cost of goods sold. It is the direct cost associated with the production or procurement of the goods sold.
  3. Gross Profit: Gross profit is calculated by subtracting sales revenue from cost of goods sold. It shows the profit that is made after direct costs are taken into account.
  4. Operating Expenses: This part of the BWA includes all costs associated with the day-to-day operations of the business, such as rent, salaries, insurance, marketing expenses, etc.
  5. Operating profit: The operating profit is obtained by subtracting the operating expenses from the gross profit. It shows the profit or loss from operations before interest and taxes are taken into account.
  6. Financial result: Financial result refers to income and expenses resulting from financial transactions, such as interest income and interest expenses.
  7. Earnings before taxes: Profit before tax is obtained by deducting the financial result from the operating result. It shows the profit or loss before taxes.
  8. Taxes: This part of the BWA includes the company’s tax expenses.
  9. Net income/loss for the year: Net income or loss for the year is calculated by adjusting profit before tax for taxes. It shows the profit or loss of the company after taxes.

When do I need a BWA?

Creating a BWA is useful in various situations and contexts. For example, you can monitor the performance of your company with a BWA. In this way, you receive well-founded data for strategic decisions and business strategies.

But a BWA is also interesting for external parties. Investors, lenders or potential business partners can refer to your BWA to assess the financial stability and profitability of your company.

The 5 most important benefits of BWA

Basically, creating a BWA helps you assess where your company is right now and which areas are doing well and poorly. This brings you a number of benefits:

  1. You can identify trends at an early stage and can prepare for changes accordingly.
  2. The BWA identifies existing problems and potential risks that you can proactively address.
  3. By knowing your company’s strengths and weaknesses, you can derive effective strategies to increase profits.
  4. Measuring your successes also helps you achieve your financial goals.
  5. The consistent implementation of the findings from the BWA can secure competitive advantages for you.

Create BWA yourself or have it created? What possibilities do I have?

If you have accounting skills and are familiar with financial analysis, you can create the BWA yourself – for example, in an Excel spreadsheet. But keep in mind that this requires time and effort. You need to collect financial data, categorize it, and use the right tools. It’s your responsibility to make sure your BWA is accurate and meaningful. Unfortunately, using free templates for BWA is not a good idea. Since every company has specific requirements, these cannot be represented in general templates. This would make the business analysis very prone to errors.

Another option is to hire an external accountant or financial expert such as a tax consultant. These professionals bring extensive expertise and experience to create an accurate and detailed BWA. You can rely on their expertise. However, you will always have to rely on the external service provider when you need a BWA. It can sometimes take a long time before they have time for your request. You do gain time because you don’t have to create your BWA yourself. But you also lose valuable days and months in which you could have reacted to the results from your BWA.

A mixed solution is also conceivable. For example, get professional support for your first BWA or for particularly complex areas of your analysis. This way, you benefit from the expertise of the experts and still retain full control.

If you are looking for a long-term solution to save time in any respect when creating your BWA, automation is the right approach for you. You may have a comparatively high initial outlay, but it pays off in the long run. Once the processes have been adapted, you will benefit permanently from an automated BWA. Artificial intelligence can be the icing on the cake. Especially with large amounts of data, AI can help you derive meaningful insights and measures that you might have overlooked as a human.

Can software generate my BWA automatically?

Whether you can create your BWA automatically depends on your data basis and software. Basically, a completely automated BWA is possible if all data is available digitally and in a compatible format. In this way, you save yourself the step of manually transferring all information into your BWA software. As a result, you and your employees gain a great deal of time for important tasks such as decision-making and strategic planning.

Full automation is not always possible or practical. But partial automation of various areas of business analysis also saves time and contributes to faster responsiveness. If you optimize your data management, each individual step already leads to more autonomy and less time and costs. Finally, automation simplifies financial interactions at various levels.

In addition, automating BWA leads to more accurate forecasts, as data-based predictions can be made using artificial intelligence (AI).

What are the benefits of AI-based BWA?

Artificial intelligence not only helps you improve your delivery performance, but also helps you with business analysis:

AI can analyze large volumes of business data quickly and accurately. It can identify patterns, trends, and correlations that are relevant to the analysis. Through machine learning, AI can also learn from past data and make predictions for future developments.

AI can assist in the identification and assessment of risks. By analyzing data from various sources, including the BWA, it can reveal potential risk factors, such as liquidity bottlenecks, payment defaults, or operational risks. This enables companies to take early action to minimize or avoid risks.

AI can automate repetitive and time-consuming tasks in the analysis process. This includes, for example, data collection, cleansing and aggregation. This allows employees to spend more time interpreting the results and deriving recommendations for action.

AI can help in decision-making by analyzing data, creating models and simulating scenarios. Based on this information, it can make informed recommendations for specific business decisions, such as investments, pricing strategies, or cost optimization.

Conclusion: Create BWA automatically and profit maximally

Basically, with a BWA you create a systematic analysis of your economic company data. This provides insights into the financial performance and efficiency of your company and reveals the strengths and weaknesses as well as possible potential for improvement.

Automating your BWA or parts of it saves you a lot of time, which you can put into other tasks. In addition, automation saves you costs because you or your employees need significantly less time for the analysis. In addition, you can always react to changes in your company at an early stage using automated BWA, because you can have a business analysis created at the push of a button at any time.

Business management analysis using AI also enables automated and particularly reliable forecasts. It cannot and should not completely replace human expertise and judgment. But it does provide valuable insights and makes the analysis process more efficient by processing large volumes of data with ease and recognizing patterns that would be difficult for humans to detect.