Decision making when it is a financial decision, what is it exactly, what are the factors involved while making one?
Decision is certainly not a gamble, “let’s try doing this, we will see what happens we will find a way out then”, such thought process can make your decision very much dependant on stoke of luck making it a gamble rather than a decision.
A Decision is a calculate risk taken with calculated assumptions based on the facts and figure which are concrete and verified.
So, when in your business you have to take decision in your business which has a financial impact, rather almost all have it, what are the step you follow
– Past Analysis
– Current Status
– Forecasting probable outcomes of this decisions with options to tackle the same
– Then finally choosing the right one out of available options.
This completes your decision-making process.
Now, if you look at these stages, at every stage your primary information is sourced from your accounting data
Your Past Analysis is to be done from your previous financials they tell you what was the performance before taking the decision also can give you the factors for preparing the forecasting post decision making.
Your Current status is seen in your current accounting data which will give you the current performance which shall become a centre point to map the effects of decision making.
In a way if you see the decision making starts with the data and ends with it too, which sourced from your accounting data.
Hence in order to make a well informed decision and not a gamble, you need to have well maintained and detailed accounting data, which will help you to reduce the efforts in decision making process.