Improve Your Decision Making: Know Your Numbers
Most business owners and managers have a good feel for their business and industry. Gut feel and instinct are important, but the true pulse of a business is in its numbers. Here’s how knowing them improves your decision making.
Improved Planning and Forecasting
A retail manager probably knows without looking at any reports that their sales go up before the holidays. But exactly when do they go up? When do customers start buying seasonal merchandise? What days and hours are busiest? Does the weather impact sales?
All of these questions flow into key decisions such as ordering and staffing levels. For example, take staffing levels. A manager going based on subjective experience might add extra workers to every shift. This might still leave the store understaffed during peak times or with wasted labor hours during slower times. If, on the other hand, the manager bases staffing levels on the store’s prior sales history, they can pinpoint exactly when and where extra employees are needed to boost service and profits without unnecessary cost.
Trust among your stakeholders is critical for ongoing success. This includes stockholders, debt holders, business partners, and your employees.
If you can’t readily present your numbers in a clear and organized fashion, potential investors will lack confidence in your ability to protect their capital. Existing investors and employees paid on commission may wonder if they’re getting their fair share.
While getting your numbers right does take time and money, it’s not an expense you can skip. It tells the entire story of who you are.
Even if you’re new to the business world, you probably know to take the IRS seriously. And one of the most important things to them is that you pay exactly the right amount of tax. Estimates or close enough are not good enough to avoid possible penalties and interest.
Many business owners respond to this issue by taking the IRS so seriously that they pay extra taxes. This often comes from being afraid of an audit and not claiming every possible expense. But this takes you from maybe having to pay more to certainly paying more.
The best approach is to get your taxes exactly right. And when you get your numbers exactly right to do it, it will also help you to defend against a possible audit.
How to Use Your Numbers to Make Decisions
Your numbers bring science into the art of making business decisions. If you’re thinking about making a particular move, you should be able to find support for it either within your own numbers or in overall industry trends. At the same time, your numbers should also provide a dose of skepticism in case your initial gut feeling wasn’t completely accurate.
In addition, your numbers can help you identify problems you weren’t aware of yet. For example, lower sales despite more customers in the door on weekends might indicate that you need to bring in more customer service staff at those times.
How to Track Your Numbers
Properly tracking your numbers requires both technology and a human touch. A good accounting program can help speed data entry and automatically check for errors. At the same time, a human needs to make sure the software is working properly and be alert for any unusual trends that might be missed by a computer following its routine.