Being a business owner has many great benefits, but there are a few challenges along the way too. One of the biggest things to overcome when going into business is the fine art of decision-making.
Without a boss to consult (and to take responsibility if things go wrong), making decisions can seem a bit daunting. We’ve put together a few simple tips to help make more informed business decisions.
Know the current status of the business
Running a business involves a lot of moving parts, so it’s not always that easy to keep up to date with everything that’s happening.
This is where a firm grasp of the financial reports can be essential. Not only are you more likely to make decisions which benefit the growing development of your business, they can also help you spot any areas which need more attention.
- Profit and loss reports help a business see how much money it’s really spending and making. This information can help you identify where costs can be cut in order to make a larger profit.
- Your balance sheet offers a snapshot of a business’ financial status at any given time, providing an overview of data such as assets, liabilities and equity.
- A cash flow report gives a detailed insight of the money coming in and going out of your account(s). This can help you prepare for upcoming bills, or decide the best time to make a purchase.
- Receivables are a breakdown of what customers owe you, including late payments and by how much they are overdue. The receivables report could be used to follow-up on late payments, or to check how reliable a customer is at paying on time (in which case, you might want to request payment up front if dealing with that client in the future).
- A payables report gives information about any amounts you need to pay out to suppliers.
These reports are all available on Pandle, along with our VAT Management tools which include VAT reporting so you can always keep an eye on what you owe to HMRC (or even better, how much they owe you!).
Using the data that is available through your bookkeeping will help you gain a better understanding of how a decision might affect your business. It’s only when you’ve got a solid grip on what you’re spending, earning, losing and saving, that you gain the foundations for these kinds of positive decisions.
Run some risk versus reward analysis
Risk versus reward analysis is probably already something which you’re doing on a daily basis without really realising.
Should you really have an extra glass of wine when have a gym session booked early in the morning? Probably not – very risky. Should you spend that little bit extra on the gardener with great reviews over the cheaper one with terrible reviews? Probably – an investment that will likely be rewarding, rather than requiring extra cash to put right.
It’s the same when it comes to making business-based decisions. You’ll need to weigh up the pros and cons in order to predict whether the reward is really worth the risk. Of course, risks come with varying degrees of severity, so it’s also essential to decide just how likely to happen that reward really is.
When doing this kind of analysis, it’s worth asking yourself:
- will this decision still be relevant in a few months (or years) time?
- or will it be a short-term gain and if so, is it really worth investing in?
Any decision needs to be planned out meticulously before ‘signing on the dotted line’, to consider the extent to which it will impact the business in both the short and long term.
Seek guidance from experienced professionals
Business owners are multi-tasking marvels and modern-day superheroes but even then, you’re still only human. The measure of a successful business owner is one who can recognise their weaknesses and seek out the help of somebody who can add value.
So, unless your business builds websites, don’t be shy about getting help in order to make things the best they can be. Likewise for other services such accounting, or legal support. Consulting the experts means drawing on their years of experience and inside knowledge to help get things right.