Making better business decisions backed by data
In business, knowing where you’ve been, where you are, and where you’re going (financially speaking) is essential to effective strategic planning, sound decision-making, and success.
Business management, strategies, goals, and decisions based on financial data mitigates countless problems faced in business, including reactionary decision-making and personnel problems.
Stop reacting! Instead, plan ahead.
When trying to lead a business, it can be easy to mistake reactions for decisions. Be careful not to make this mistake, as it can mean the difference between achieving success and closing your business.
CEOs and business owners tend to make bad decisions when reacting to cash flow issues or operational problems. When you plan ahead using actionable financial intelligence and make more strategic, data-driven decisions, you’re in a better position to control the outcome of a potential situation or avoid a potential problem.
When leaders constantly avoid making choices, the business is held in a perpetual state of clean-up, scrambling to pick up the pieces rather than sprinting toward the next goal.
Being proactive in making decisions for your company helps to avoid pitfalls, while allowing you to anticipate and leverage every opportunity.
Data-driven decision-making = strategic growth
To make strategic decisions backed by data instead of going with your gut, you’ll need management reporting.
Management reports allow you to dive deeper into the financial standing of your business.
Unlike traditional financial reporting, management reports help CEOs and business owners really understand who their most profitable clients are, what makes them profitable, and figure out if they are pricing their jobs right.
Some leaders think that financial reporting is enough to effectively run their company. However, traditional financial reporting does not provide the actionable financial information you need to make more informed strategic decisions.
To drive the performance of your people, to understand the profitability of your customers, to analyze pricing and your marketing spend, you need to use management reporting.
The key is to start with the end in mind – what do you want? Then distill the drivers of your business – what will get you there? Finally, get the management reports that help you measure performance, productivity, and results – the data – so you can make better decisions.
Passion and good preparation aren’t enough for sustainable, scalable business growth. By having a strategic mindset, diversified growth strategies, and efficient operations, you will have the pieces in place to drive sustainable growth for your business.
These data-driven decisions will help you maximize your company’s revenue, minimize your costs, grow profit margins, and accelerate success. To do this, you must first understand your primary channels of revenue.
Validating your business model
If you do not truly understand your primary channels of revenue, then you do not truly know what type of business you are operating, which means you cannot make good decisions for it. For example, a window washer who has invested in more squeegees might find (to their dismay) they make more money selling their patented washing fluid than they generate by actually washing windows.
An interior designer who spent big on marketing their consultation services might discover their business brings in more money through the sale of furniture and décor rather than through consultation.
Management accounting reveals your company’s strongest revenue generators, indicating into which parts of your company you should invest revenue.
Start with management accounting for your business
Bolster your back office bookkeeping and accounting practices by having policies, procedures and technology that automate and facilitate your ability to generate timely and accurate financial reports. From these reports you will measure and track vital key performance indicators (KPIs).
These KPIs act like a scorecard for your business’ health, growth and future.
Having accurate financial data readily accessible allows you to measure profits and profit margins, optimize pricing and streamline operations to grow your business and increase profits.
Your bookkeeping and accounting solution should produce accurate and up-to-date financial and management reports that provide the financial information you need to make sound strategic decisions.
Diligently recording data, measuring and tracking key performance indicators, and learning to apply historical financial data to your everyday business operations and strategic planning will help you make the right decisions.
Watch the webinar on demand: KPIs and the four core decisions to increase profits
Category: Strategic Planning
Tags: Data, financials, reporting
Great reminder Steven!! Companies often just measure lagging indicators and miss what’s really driving, or not, their business.