Are you a proactive or reactive business decision maker?

A common challenge for business owners is managing the financial aspect of the business. Many business owners are consumed in the day to day activities of running the business, which leads them to make reactive decisions instead of proactive ones. The impact of not spending time on the financial aspect of the business puts the business at risk.

Here is how you can make the switch from being a reactive to a proactive decision maker.

1.-  Have an annual financial plan in place-

This includes implementing an annual budget process and having cash flow projections. Once you have an annual budget in place you can incorporate a forecast to make adjustments as things in the business change.

2.- Focus on key ratios-

Spend time understanding liquidity, growth and activity ratios. Once there is a budget and forecast in place, it is important to monitoring those ratios and compare them against the budget to see where changes need to take place. If you are new to this process it is recommended to monitor cash on a weekly basis.

3.- Have Key Performance Indicators in place and monthly review meetings-

Review financial results against KPIs with key members and identify gaps within in the business and have a strategy to fix those gaps. This will help team members be aligned with the business goals, which makes everyone in the organization accountable. Quarterly meetings are important as it allows to go deeper into the numbers and adjust the forecast as needed.

Being a proactive business decision maker not only benefits the bottom line, but it also gives clarity and direction to everyone in the organization. This allows everyone to understand their impact in the organization and employees work as a team which gives employees a sense of purpose and unity.