6 ways to help your small business make better decisions
Often business decisions must be made at a moment’s notice and to appease a variety of stakeholders. It can be difficult to make sense of all the data that is available to you and effectively use it to inform what courses of action to take, especially as a small business.
So how can your business ensure it’s making the best choices for its future? The following are 6 simple ways to help your business make more informed and insightful decisions.
- Consult your business plan
The business plan has evolved from being a formal, written document to being a more fluid entity. It can still take the form of a document (a virtual one perhaps) but should be updated regularly to reflect the current state of your business, describing your business’s objectives, strategies, sales, marketing, and financial outlook.
An effective business plan clearly lays out a business’s core objectives over the coming period and exactly how these objectives will be met. With a clear plan that maps out the strategies to achieve those objectives, your business can refer back to its plan when faced with important business decisions, ensuring the eventual course of action is in line with its central strategy.
- Use accounting software
Gone are the days of spending hours sifting through bills and invoices on paper and reconciling them to bank transactions. Cloud-based accounting platforms like Xero allow you to store all your business’s financial data online and are accessible 24/7 from any device, all for an affordable monthly subscription. These platforms can link to your business’s bank account, allowing you to easily create and reconcile invoices in seconds.
You can also customise your package to fit your business’s needs with the Xero marketplace, where you can find a multitude of add ons that can automate business processes like inventory, CRM, chasing clients to pay invoices, and time tracking.
With cloud accounting, your business can spend less time sifting through receipts and more time creating new products, supporting your customers, and making informed business decisions with up-to-date financial information on hand whenever you need it.
- Create a cash flow forecast
A cash flow forecast predicts when and how much money will enter and leave your business’s bank account over the coming weeks, months, or years. This forecast can provide early warning signs for when your business will be running low on cash, allowing you to prepare accordingly – maybe you need to slash operational costs or take out a loan. On the other hand, a cash flow forecast also allows you to see when your business will have a surplus of cash, so you can plan how to reinvest this money into the business.
With a cash flow forecast, you can create financial projections and model how certain decisions will impact your future cash flow, enabling you to predict things like if your business can afford to hire an extra employee. An accurate cash flow forecast provides a clear view into how the decisions your business makes will affect your future cash position – and the likelihood of business success.
- Produce management reports
Also known as business intelligence or analytics, management reporting is a key method for keeping track of the overall performance of your business. A management report includes a series of business documents, such as your Profit & Loss budget, Balance Sheet, and Cash Flow Forecast. This information allows senior management to see which business areas are performing in line with business objectives and flag the areas that need adjusting due to overspending, inefficiencies, or minimal growth.
Management reporting is usually done monthly or quarterly, depending on the needs of your business. These reports are used for board reporting or to demonstrate your business’ performance to potential investors. Xero has a built-in management report which is easy to export into a PDF and share with others. For more on management reporting in Xero, check out this guide.
- Make use of Google Analytics and Adwords
The free tools provided by Google are essential to measure the effectiveness of your marketing efforts and use the data to guide decision-making.
Adwords allows you to advertise to potential customers who are searching for your specific product or solution, and you only pay if people actually click on your ad. You can also use the Keyword Planner in Adwords to see what terms related to your offering are searched the most and use this to tailor your ads and content to this audience.
With Analytics, you have access to in-depth data about your online presence and audience. You can see how visitors are coming to your website, which pages of your website people spend the most time on, and measure the effectiveness of your advertising. These insights allow you to make the most effective decisions about your online presence by letting you see what parts of your digital marketing efforts are doing well – and those that need a bit of TLC.
If you’re completely new to Analytics and Adwords, Google’s Digital Garage is an online course that tells you everything you need to know about building your business’s digital presence.
- Test out some strategic frameworks
If all else fails, you can try the old fashion way and refer to the various decision-making frameworks, such as a decision matrix, cost-benefit analysis, a T-Chart, or even the seven step decision-making process. These tools are useful if you need to clearly visualise the pros and cons of making a certain decision.
A detailed list of these frameworks and the most common decision-making mistakes can be found here.
This is a guest blog by Float, for more information visit floatapp.com.