When you’re running a small business, the financial decisions you make determine your profitability and your path forward. It’s hard to know which decisions are right, however, even when you understand the gravity of making them.
If you’re in the process of growing or scaling your business, you may be faced with an onslaught of decisions especially.
The following are some of the things you need to know to be strategic and smart in your financial decisions as you build your business.
Automate Where You Can
There are a lot of advantages to automating certain workflows and processes in your business. For example, if you automate AP and invoice processing, you can then save money, eliminate human errors, and you can gain insight from high-level visibility. All of these components are going to fuel better business decisions.
Whether you’re the one heading up the financial department or you have a team of employees, you’re taking out repetitive administrative work and facilitating opportunities for strategic thinking and decision-making.
You can look at all the data captured through automation platforms and use it as an analytics-driven way to make decisions, rather than relying on your instincts alone.
In general, automation and using good technology-based tools are going to give you accurate financial data that should serve as the basis for all of your decisions. Without accessible and accurate financial data, it’s nearly impossible to make the right decisions to drive your business forward.
This data needs to be timely as well, which is why constant visibility is a priority. You can pull the data when you need and how you need it as a basis for a financial decision.
Use a Financial Dashboard
Somewhat in line with what’s discussed above is the idea of using a financial dashboard. This will allow you to not just make better decisions but to do so faster.
A financial dashboard is a visualization tool that brings together financial statements and then creates reports based on key metrics. You can monitor performance in real-time, making more accurate decisions.
A financial dashboard makes it easier to see where you need to put your attention to grow sustainably. Using a financial dashboard won’t just help you make better financial decisions—it will also help you improve processes.
Examples of when you should invest in a financial dashboard include when you’re ready to scale up to the next level and when you want more insight into your business. If you want to improve your efficiency a financial dashboard can prove useful, and also if you have to make critical decisions in the near-term.
Define Clear, Specific Goals
You can’t possibly be sure you’re making the right long-term financial decisions if you don’t have clear, specific, and ultimately measurable goals in place for your business. You want to be able to bridge any decision you make to your larger business goals.
You can create goals that are short- and long-term.
Revisit these goals regularly to make sure they’re still in line with your strategic objectives.
Measure each decision you make against the goals you’ve set for your business.
Rely On Your Financial Statements
If you don’t regularly look at your financial statements, it’s something you should be doing.
Financial statements, which include your income statement, your balance sheet, and your cash flow statement, show how healthy your business is financial. They can also show you a relationship between business decisions that you make and performance.
Reviewing your financial statements and incorporating them into decision-making can help you avoid a big mistake business owner often engage in, which is viewing profit and cash as the same thing.
Your business can be profitable but, due to a lack of cash, still, go under.
Involve Your Team
Your team can provide you with insight, information, and considerations that might not otherwise occur to you, so consult them when you’re making any decisions, including big financial decisions.
Teams almost always tend to make better decisions than individuals. Your employees may have better ideas to fill in the gaps of your business and to solve a problem than what you can come up with.
Finally, this has been mentioned in some ways above, but you should track the viability of every financial decision you make. Otherwise, you’ll have no way of knowing how to improve your decision making going forward. This means you have a clear picture of how each specific decision is impacting the business overall.
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