How to Use Financial Reports Available to You to Make Business Decisions
Business decisions based on the actual financial position of your company may be more accurate and directed than ones based on assumptions or perception. Most businesses have a set of financial reports created as part of their ongoing operations that can be used to make routine or critical business decisions. Regardless of your position within your company, you can utilize financial reports to enhance your decision-making abilities. Successful business professionals use factual financial data as a basis for practical, subjective and numerical business decisions.
Other People Are Reading
Instructions
-
-
1
Collect current financial statements and reports. These reports are frequently generated by the accounting department. If you are a small business, you may be able to generate financial reports from the financial or accounting software you use to manage your business. Common reports include balance sheets, income statements and cash flow statements.
-
2
Learn to read the financial reports available to you. You must understand how each line item in each report relates to the actual functioning of your business. Use the balance sheet to determine short-term debt obligations, long-term financial requirements, one-time expenses, recurring payments, variable costs and business assets. From the balance sheet, establish revenue, net earnings or losses and the costs of generating revenue. Cash flow statements illustrate available cash that may be needed to finance any business decisions you make.
-
-
3
Dissect the business decisions you need to make and tie them to the financial reports. Look for financial data that could help support or sway your decision. For example, if you need to decide whether to hire another employee, ensure you have sufficient cash flow to support an increase to your routine payroll.
-
4
Investigate any numbers that correlate to your business decisions. Find out what parts of the business operation contribute to the numbers and determine any known changes that will impact the financial reports. This type of investigation often requires talking to other departments and managers within your business. Making decisions from current and anticipated financial reports leads to well-researched decisions.
-
5
Document your decisions and note down what financial data led to your conclusions. Pass this information on to your boss, board of directors or executive personnel where appropriate. This documentation helps record the basis for your decision, and may help your superiors understand the financial logic behind your choices.
-
1
References
- Photo Credit Medioimages/Photodisc/Photodisc/Getty Images
