When you want to grow a mid-sized business, a fundamental tool your finance team can use is performing a financial trend analysis.

The process involves gathering historical data at specific points in time and analyzing the data to identify trends and patterns that appear. By conducting this exercise, the chief financial officer (CFO) and finance team within your organization can make better-informed decisions based on their predictions. 

2025 brings unprecedented challenges for growing mid-sized businesses, like the U.S. tariffs. Furthermore, 75% of medium-sized enterprises say rising costs have affected their business, according to a Business Development Bank of Canada study.

As a result, it’s important to be armed with knowledge so you can make necessary adjustments. By adapting, your business can remain resilient during economic uncertainty.

Read on to learn what a financial trend analysis is, why it’s important to use it, and how your CFO and finance leaders can conduct this insightful analysis for your business. We’ll also explore the advantages and disadvantages and review an in-depth case study. 

Table of Contents

• Gaining a competitive advantage with financial trend analysis
• The role of financial trend analysis
• Key industries that use a trend analysis
• Performing a financial trend analysis at the optimal time
• Types of financial trends
• Benefits of using financial trend analysis
• Challenges of using financial trend analysis
• How growing teams can conduct a financial trend analysis
• Example case study: restaurant owner
• Growing your mid-sized business from the ground up
• QuickBooks: Helping scale your business with the right financial tools
• FAQ

Gaining a competitive advantage with financial trend analysis

A financial trend analysis can help empower the CFO, finance team, and business manager to make strategic business decisions when it comes to financial planning and forecasting. The dynamic process requires using historical financial data to predict future trends and patterns.

By examining what’s happened in the past, medium-sized businesses can identify trends based on key figures such as their revenue and expenses.

Finance professionals call this a time-series analysis because it involves collecting data over several years. Typically, the data is analyzed horizontally on a spreadsheet, then plotted on a graph to show a linear trend. The finance team can analyze the trend to forecast the company’s growth or risks. They can also strategize on how to seize market opportunities or mitigate potential risks.

Finance managers can instantly send data from QuickBooks to Excel to create a report with the latest numbers. Alternatively, they can take the data from Excel and sync it with QuickBooks. Either way, they have the flexibility to choose how they want to work with the data.

For example, a manufacturing company can take the annual sales from the past five years and determine the growth over this time frame. If sales have been trending up for the past several years, this may indicate that it has a loyal customer base and is attracting new customers. This analysis can provide valuable insights into a company’s financial health, performance, and profitability.

The role of financial trend analysis

A well-executed financial trend analysis can help your organization in various ways.

This strategic practice can help you discover trends in the following areas:

• Sales and revenue trends: Finance professionals can examine sales patterns to see if customer demands are increasing or decreasing. Factors such as new products or services, new and repeat customers, or regionalized sales may impact these trends.
• Expense tracking: The accounting team can verify expense reports and work with the finance team to see if these expenses have been rising or falling. This can be a golden opportunity to find cost-cutting measures to minimize expenses.
• Pro tip: Mid-sized businesses that use QuickBooks Online Advanced always know where their money is going because they can connect QuickBooks to their business bank accounts, credit cards, PayPal, and Square. Plus, they can easily categorize their expenses and run reports.
• Budget forecasting: Reviewing previous revenues and expenses can better equip businesses to create more accurate budgets.
• Capital expenditures: Financial analysts can review past expenditures to determine if they’ve helped the business scale. These insights can help decision makers allocate the appropriate funds toward future expenditures.

Key industries that use a trend analysis

Many industries and sectors can implement a trend analysis, including businesses with 10 or more employees that operate an agency, a franchisee, or a service-based company with numerous locations.

Additionally, those who work in retail, healthcare, technology, construction, or manufacturing can benefit as well.

Regardless of the industry your business operates in, QuickBooks has a comprehensive, all-in-one financial hub that can provide real-time financial reports, help schedule your employees, and assist with inventory management. These flexible solutions can be a great fit for your business and your budget.

Performing a financial trend analysis at the optimal time

Generally, it’s recommended to have numerous years of data and financial statements available to conduct the analysis. The more data you’ve collected, the more accurate your predictions can be — which in turn will help you build stronger business strategies.

Also, the best practice is to conduct a year-over-year analysis (instead of a month-to-month analysis) to see how your business is performing over time. A month-to-month analysis can be misleading, as your business may be impacted by seasonal or cyclical trends.

For instance, if your business sells beach-wear and accessories across Canada, you’ll likely see higher sale volumes during the spring and summer months. Upon conducting an analysis from May to June, you see that your sales grew by 25%, which can be skewed by the seasonal demand.

A more accurate analysis is to compare your sales from this year to last year. If the analysis shows that sales increased by 20%, that’s a better indicator of how your company is performing. 

Based on this, established mid-sized businesses with several years under their belt may be best suited to perform a financial trend analysis. 

Types of financial trends

When you’re examining your graph, it’s important to understand what the trend is communicating to you.

The following are the most common trends that business owners and financial professionals should have knowledge of.

Horizontal trend

This type of trend is also known as the sideways or lateral trend. Essentially, when you see this horizontal line, it could be a sign that your company is consistently succeeding under pressure, or it could mean this is an area where the company is stagnating and requires extra attention.

Imagine, for example, that your manufacturing costs are stable during a time when materials are rapidly increasing. This could mean your efforts to mitigate rising costs are achieving the desired result. 

On the other hand, if you see that your revenues are level when customer demand is at an all-time high, this may signify that there’s an opportunity to establish a new business strategy to increase market share.

Upward trend

If the connected data points show an upward trend in your graph, this illustrates that the variable you’re analyzing is increasing in value over a certain time frame.

Typically, this is a positive sign if you’re tracking your sales or revenues. This may prove that your customers are returning and your customer base is expanding based on your marketing campaigns. 

However, it may be a red flag if, for example, you’re investigating the wait times at one of your busiest medical clinics. With higher traffic and extended wait times, it could indicate that you need to hire more staff to handle increasing patient volumes and ensure customer satisfaction doesn’t decrease.  

Downward trend

Based on the data you’re analyzing, a downward trend can show that the variable is decreasing over a time period. 

Similar to the upward trend, what this means for your business depends on the type of data you’re reviewing. For example, if you’re looking at the number of customers who are returning products and this shows a decreasing line, it means you’re headed in the right direction.

Conversely, when you see a downward trend in sales at a particular retail store, it may signal that there could be increased competition in that region. You may need to strategize on how to retain customer loyalty by gathering competitive intelligence.

Seasonal/monthly trend

Certain businesses generate significant sales during certain times of the year, usually lasting several weeks to months. Due to their seasonality, they can easily predict their slow and busy periods.

For instance, you may notice your operating expenses rise for the months of the November and December holiday season because your sporting goods store sells ice skates. Recognizing this trend will allow you to plan ahead for additional staff, stock up on skate inventory, and offer extended store hours to accommodate the increase in customers.

In contrast, if you see that you have the lowest customer volume at your beauty salon during the months of January and February, it may convey that you need to introduce special promotions to encourage customers to pay another visit — or adjust your shift work schedule accordingly during slow periods.  

To streamline the financial analysis process, mid-sized businesses use financial software tools to access financial reports, run payroll, and manage accounting tasks. With the help of QuickBooks, you can seamlessly integrate with over 750 third-party platforms so you can manage your business on the go.

Benefits of using financial trend analysis

There are numerous advantages of incorporating financial trend analysis to help businesses grow.

The most common benefits include:

• Better decision-making: Based on the trends and patterns found, it enables businesses to make evidence-based choices in relation to product pricing, budgets, resource allocation, and capital investments.
• Improved financial planning: When businesses assess their financial performance, they can create accurate budgets. By having tangible data, they may be able to justify upcoming capital expenditures to help the company grow and operate efficiently.
• Enhanced strategic planning: Businesses can have a competitive edge and develop comprehensive marketing strategies to tap into an emerging market. They can also develop superior products to stay ahead of their competition.
• Optimized workforce schedules: Understanding the optimal time to schedule your team will help ensure they aren’t being overworked or underutilized. One of the unique features of QuickBooks Online Advanced for business managers is the ability to create schedules for employees within minutes. It’s as simple as choosing the day, time, and location; assigning team members; and notifying them. As your team scales, QuickBooks can grow with you. 
• Efficient resource allocation: Forecasting buying patterns can help ensure you have sufficient inventory to meet customer demand.
• Insights into market sentiment: As consumer behaviours change, a solid understanding of the evolving market landscape can help businesses adjust their product and service offerings to meet the needs of their customer base.
• Discovery of potential opportunities and risks: Pinpointing early indicators of possible risk can help business owners take proactive measures to mitigate these internal or external threats. It can also uncover areas for growth and expansion by reviewing revenue and profit trends. For example, a business could investigate ways to diversify revenue streams.

Challenges of using financial trend analysis

Before you decide to carry out a financial trend analysis, it’s important to consider some of the downsides that may impact your enterprise:

• Inaccurate data: Working with incorrect statistics can heavily skew the analysis and bring about false conclusions. For example, if a business aims to track profit margins but doesn’t include all the associated expenses, this may result in overestimating profitability.
• Unorganized data collection: It’s essential for businesses to have organized bookkeeping records and data management systems in place to facilitate proper financial data analysis. Failing to do so could lead to incomplete datasets.
• Lack of objectivity: It’s important for those reviewing the data to avoid bias (whether conscious or unconscious), as this could result in skewed conclusions.
• Misinterpretation of data: If the individuals analyzing the data don't have a solid grasp of the industry, competitors, and economic conditions, there’s a possibility of misinterpreting the figures and drawing inaccurate conclusions, which leads to poor decisions.
• Forecasting restrictions: Remember that past performance doesn’t automatically predict future performance. Although a business may have experienced strong growth in sales, new innovations from competitors or market disrupters could impact future sales growth.
• External macroeconomic influences: This type of analysis only looks into a company’s internal financial data. Businesses need to understand economic cycles, political changes, industry regulations, consumer behaviour, and ever-changing market conditions, all of which can impact the success of a business.

How growing teams can conduct a financial trend analysis

Now that you have a firm understanding of the pros and cons, here are the five steps a finance professional should take to carry out a financial trend analysis. Many experienced finance professionals are well versed in this process already, so this can serve as a guide, best practice, or training tool for your organization to follow.

Step 1: Decide on the key metric

When you begin, you need to set your objectives and determine which variable you want to measure. Key metrics may include sales, revenues, profit margin, cash flow, debt-to-equity, expenses, and return on investment (ROI).

For instance, by choosing your profit margin as a metric, it will measure the percentage of profit from your sales over a period of time. Alternatively, using a debt-to-equity indicator will show the trend in the ratio of debt-to-equity financing that’s being used in your business. To effectively analyze your company's overall financial well-being, it's essential to use multiple key metrics to ensure you're covering all angles.

Step 2: Gather the data 

This vital step involves collecting the financial data needed for the analysis. Remember, it's crucial to have rigorous protocols in place to ensure high-quality data is gathered.

You can obtain this data from multiple sources, like financial statements. Fundamental documents will include your balance sheets, cash flow statements, and income statement. As such, having a cloud-based system can enable cross-functional teams to access real-time financial reports and foster collaboration.

When you’re on a time crunch and meeting an important deadline, it’s essential to have up-to-date financial reports. With QuickBooks Online Advanced, you have access to a cloud-based library of presentation-ready management reports that are easy to share with decision makers.

Step 3: Analyze the data

A finance manager can connect the dots to discover common patterns and trends. This is where they will notice whether the trend is upward, downward, horizontal, or seasonal. Based on the trends and the type of data being evaluated, your team can determine if your company is performing well or if there are areas for improvement. 

Step 4: Draw conclusions

After completing the analysis of the financial data, you’ll need to interpret the results with precision. The team members who conduct this analysis must have strong knowledge of your business and the industry. This multifaceted approach requires team members to be up to date with external factors such as new and existing competitors, consumer demands, economic fluctuations, or political changes.

Additionally, the process requires you to have a solid understanding of the trends or patterns that have been identified. For example, if your team detects an increase in profit margins, this may be strong evidence that your business has effectively reduced costs.

In contrast, a decrease in sales may indicate that your customers are not making repeat purchases. Therefore, you may need to craft new marketing strategies or product offerings to maintain profitability.

Step 5: Make business decisions

In this final step, mid-sized businesses have the opportunity to mitigate certain risks or focus on a particular area that has growth potential. These business decisions need to align with the company’s goals and targets.

If your business is flourishing, this is an indication to continue following established protocols and maintaining the status quo. However, if you notice that costs are creeping up, you’ll need to uncover new strategies to minimize your expenses.

Your finance team will be required to report these findings to executives and decision makers within the organization. They may also need to involve key stakeholders such as the product, sales, or operations team to ensure the team is collectively working toward a common business objective and abiding by the company’s priorities.

Example case study: restaurant owner

A local restaurant that sells soups and sandwiches has three locations within Toronto in Ontario, Canada. The business owner is looking to evaluate their sales based on five years of data they’ve gathered in an underperforming location. By performing a financial trend analysis, they observe that the graph is displaying a horizontal trend. 

In the past year, a competitor opened up a shop down the street. Given that sales have been stable, this signifies they’ve been able to maintain steady sales despite increased competition in the neighbourhood.

In addition, there’s been a trend of consumers seeking healthier food options while dining out.

The results of the analysis show stable sales, but they also indicate pivotal opportunities for growth. Having completed the financial trend analysis, the finance team will implement a few critical business decisions over the next few months:

1. Expand the menu by offering salads.
2. Advertise lunch specials.
3. Create a rewards program to encourage customers to make return visits.

To ensure a smooth launch, the operations manager will train 15 team members. By making these strategic business decisions, they hope to increase sales by 15% within the next 12 months. If the restaurant achieves this target, the restaurant owner may consider scaling the business to open a fourth location next year.

From streamlining complex financial tasks to offering real-time insights on an organization’s performance, QuickBooks Online Advanced has the ideal solution for businesses striving for operational efficiency and productivity.  

Growing your mid-sized business

When managing business finances and a growing team, implementing financial trend analysis within your company can offer valuable insights into your business’s financial well-being and shed light on any strengths and weaknesses.

As a mid-sized business owner learns the benefits, pros and cons, and process of a financial trend analysis, they can use this powerful tool to make educated business decisions, forecast future trends, and maintain sustainable growth.

Finance professionals can combine financial trend analysis with their knowledge and expertise and stay informed of external factors or economic fluctuations. Using this multipronged approach can help drive long-term business success.

By implementing these significant finance strategies, your business can stay afloat during economic downturns and find opportunities to boost profits.  

QuickBooks: Helping scale your business with the right financial tools

With the evolving economic landscape, medium-sized businesses need to be nimble and face challenges head-on. No matter how big or small the obstacles you face, QuickBooks Online Advanced has the right-sized tools you need to work smarter and grow faster. As your business grows, QuickBooks can grow with you by providing scaled financial tools at your fingertips — helping you make wise business decisions every step of the way.

Whether you’re in construction or professional services, learn more about the tailored solutions QuickBooks Online Advanced offers mid-sized enterprises to foster growth, including a comprehensive financial suite of tools to help your finance, operations, and HR teams.

Get in touch with QuickBooks for more information.

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