Data is one of the most valuable resources that any business has at its disposal, and you need to be able to manage it efficiently in order to monetize it and enjoy its other benefits. Most large businesses are already well on their way towards replacing outdated legacy systems and moving toward complete digital transformation. Yet this can benefit businesses of all sizes, as replacing outdated technology improves efficiency, empowers employees, allows for better customer service, and much more.
These days, it’s becoming increasingly important for software solutions to be integrated or combined into a single system. This allows formally disparate systems to communicate with each other and share data, which makes it much easier for your business to maintain accurate, up-to-date information and draw valuable insights to improve business processes. Master data management (MDM) is especially important when you have integrated solutions.
MDM is basically the management of all shared data between your systems, and managing reference data is a crucial part of it. The reference data definition is basically that it’s a subcategory of master data that’s used for classification and for establishing hierarchies. Here are some of the main types of reference data and how you can incorporate them into your business.
The most common types of industry codes you’re likely to encounter are the North American Industry Classification System (NAICS) and the Standard Industrial Classification System (SIC). These codes are used to classify businesses by their industry types. While the SIC was largely replaced with the NAICS in 1997, you may still see some regulatory documentation using SIC codes. If you interact with European businesses, you’ll be likely to see NACE codes as well.
Naturally, it’s important to keep your own codes up to date to ensure compliance, but the main reason you’re likely to use these is because of business intelligence. These codes are useful when you’re establishing a business, so you can see how your intended industry performs in an area, and the codes can always give you ideas for potential business partners. They’re also useful for identifying your direct competitors, so you can perform an effective competitive analysis.
These codes identify all of your business transactions. They typically come in three basic forms.
- Cash Codes: These are used for payments made in cash or by check.
- Bank Service Codes: These represent payments by credit or debit cards.
- Bills of Sale: These are orders for payment of a specific amount at a specific time. They aren’t commonly used in the U.S., but businesses working with European organizations may see them.
These codes can let you easily identify the customers and businesses you work with most frequently, and you may choose to prioritize them in customer hierarchies. You may integrate customer data collected via your CRM system, for example, with a sales solution, so your sales team can make special offers to your most loyal customers.
Speaking of customer hierarchies, you might also use customer reference data to divide them into different market segments. Every business has a target audience, but you might realize that you’re reaching certain members of your audience better than others. By dividing your audience into segments based on things like demographics or levels of need, you can work with your marketing team to more effectively reach each customer segment and boost sales overall.
Of course, these are just a few examples of how you can leverage reference data. With better data management overall you’ll be able to cut costs on managing multiple systems, improve your data quality, and update information more easily than ever before.