If you are a business owner then you really need to know your numbers. But recent statistics show that almost half of UK company owners say they frequently need to ‘go with their gut’ when making decisions on budgets and investments.
The Quick Thinking report from data streaming firm Confluent used data from 200 UK CEOs, MDs and C-level executives. Nine out of ten business leaders told researchers they need to make decisions quicker than ever before.
But they have less time to make them, they say. And that means they use their instincts rather than facts when deciding what action to take for their business.
The need to make quick and usually uninformed decisions, the reports states, is because they find it too difficult to access insights in real time. As a result, 45% of business leaders admitted they use instinct when making budget decisions.
Many accountancy software packages can give real time data. But understanding the numbers and interpreting them slows the process down. And this, says the survey, leads to business owners feeling too pressurised, so they use ‘gut feelings’.
But making business decisions without knowing your numbers can create issues.
Here are five reasons why you need to know your numbers to run your business.
5 reasons you need to know your numbers to run your business
1. It helps make better decisions
You may have an ‘idea’ about your company’s current financial situation. But an idea isn’t always factual! From investing in new equipment to hiring more staff or expanding your product line, there are always times when you need to make decisions on spending.
But if you don’t have real time data, you’re just guessing. And if your memory is wrong, then you could be spending money your business doesn’t have. Knowing your business numbers gives you a clear picture of its financial health.
2. It improves cash flow management
Without understanding cash flow, your business struggles because it is a company’s lifeblood. You need more cash to flow in than flow out, in simple terms! But how can you predict your future cash flow needs without knowing your numbers?
Getting to grips with your cash flow will mean you can plan for any seasonal fluctuations. And it will also mean you know when you have enough to cover your expenses. A proactive approach avoids cash flow problems that can create operational issues and reduces growth.
3. Know your numbers to boost profitability
If you understand your business numbers, you can identify areas where costs can be cut to improve efficiency. Analysing your expenses, where money is being wasted and finding ways to reduce costs without impacting your quality goods or services can give profits a boost.
4. You can navigate economic change better
One thing about running a business is that it is always changing. Whether it’s down to market trends, new government legislation or economic conditions, no two years are exactly the same.
All business owners find these changes a challenge. But it’s an even bigger problem when you don’t know your numbers! Understanding the financial health of your business in real time means you can quickly assess the impact of any significant changes. And if you are prepared, you can make adjustments to stay on track.
5. You can set realistic goals
Creating goals is essential in business. Whether it’s a simple goal or something bigger, you need to understand your company’s finances to set it. An uninformed goal is nothing more than a guess! And you really don’t want to be guessing when it comes to financial business decisions.
Having a clear picture of where you stand financially helps set goals that are achievable. Setting unachievable goals can end up being disheartening because you’re less likely to reach them.
What should I do?
If you don’t know your numbers, it’s time to get to know them. Accounting software can help. But you need to know how to interpret the numbers. A little knowledge is a dangerous thing, so speak to someone who knows how to read numbers. You can contact us today or fill in the form below.
