The 15 Critical Areas to Consider When Running a Business: Information Processing and Decision Making

Given the right information about the business environment, including customers, suppliers and the legislation, most businesses would thrive because the decision makers would easily know what to consider and what to overlook.

Unfortunately, the reality is far from ideal in that much of the information which helps with effective decision making is scantly available, and thus, it’s up to the entrepreneur to devise the right tools which help with information gathering, processing and management.

In order to help in this regard, I created The Smart Decision Toolkit premised on the Fundamental Congruence Checklist which is basically a set of ten questions that helps you to broadly or systematically process information about any subject in order for you to understand it better.

By answering the questions on the checklist, you will be able to deploy a Systems Thinking approach which helps you to open-mindedly analyse critical information towards making informed decisions.

The Systems Thinking approach basically gives you a broader or multi-directional perspective of reality since it takes into consideration many things that can be affected by the decision you make in one aspect of your business.

In order for you to appreciate the relevance of Systems Thinking, you need to understand the definition of a SYSTEM.

I describe a SYSTEM as the sum total of components which makes something functionally whole.

Based on this definition, you can see that the failure to see the connection between the issue you are deciding on, and many other aspects of your enterprise can cause you to make short-sighted decisions that can temporarily seem to work but backfire in the long run.

As such, if you are running a business, you must be able to ask as many questions as you can and generate as many answers possible as a way of helping you see the bigger picture in dealing with the day-to-day operations of your enterprise.

Listed below are fifteen (15) important aspects which you must consider and employ checklists when making business decisions in stiving to genuinely answer the related questions and then use those responses to craft your winning strategies.

1) Sales Volume 2) Cash Flow Management 3) Accounting and Bookkeeping 4) Stock Management 5) Staff Performance 6) Supply Side Challenges 7) Marketing or Customer Acquisition and Retention 8) Evolution/Transformation 9) Synergies/Value Chain 10) Customer Feedback/Complaints 11) Management, Leadership and Supervision 12) Human Resources Management 13) Profit Margins14) Housekeeping 15) Decision Making

1. Sales Volume:
a) What is your average customer basket — what is the average amount spent by customers in your business and what do they buy?

b) What is your fastest moving product and why? — which products are selling fast in your business and what do you think is the reason behind that trend?

c) What is your slowest moving line and why? Which products are taking long to sell in your business and what do you think is the reason behind that trend?

d) What are your average moving stock lines and why? Which products in your business have a relatively steady demand pattern and what do you think is the reason behind that trend?

2. Cash Flow Management
1) Is your rate of stock turn good enough to ensure that stock pays for itself rather than using money from fast selling goods to pay for slow-moving products.

2) Is the business always liquid enough to cover trading expenses and overheads or you are always struggling to settle the bills at the end of the month?

3) Is the business always liquid enough to enable you to negotiate for discounts? Do you generate and keep enough money which gives you an upper hand in paying for stock and services? — Always remember that cash is king.

3. Accounting and Bookkeeping
1) Do you think and believe that you have the correct information about the financial status of your business?

2) Do you have an in-house accountant/bookkeeper in your business, or do you outsource and why?

3) How are payments to your creditors recorded and who records them?

4) How is the business income recorded and who records it?

5) How are various other expenses in your business accounted for and who accounts for that?

6) How are irregular payments to creditors cancelled/reversed and who does that?

7) How is irregular income or errors in income transactions in your business cancelled/reversed and who does that?

4. Stock Management
1) What is your rate of stock turn — how quickly are you converting stock into cash (money)?

2) What are your most profitable stock items?

3) What are your fast selling stock items?

4) What are your slow-moving stock items?

5) What is your returns policy regarding suppliers and customers?

6) Are there products which you want to sell because of demand but you are failing to get from suppliers — which products are those and why are you failing to get them?

5. Staff Performance and Discipline
a) How do you measure staff performance in your business?

b) How is your own performance measured?

c) How do you handle work related offences and why?

6. Supply Side Challenges
a) Do you buy your stock in cash or with credit?

b) Which products do you buy in cash and why?

c) Which products do you buy on credit and why?

d) Which suppliers do you have credit accounts with and why?

e) Which suppliers do you prefer to deal with in cash and why?

7. Marketing or Customer Acquisition and Retention

a) Who are your current customers? E.g. Contractors, businesses, individuals etc.

b) What are your current customer segments, and which one is the most valuable and profitable? E.g. House owners, plumbers, builders, carpenters, electricians etc.

c) What is your preferred customer segment? E.g. House owners, plumbers, builders, carpenters, electricians etc.

d) What incentives or benefits do you give to your customers and stakeholders? E.g. Club membership, discounts, commission etc.

8. Evolution/Transformation
a) What are your challenges regarding the adoption of certain modern business practices in your industry?

b) Are you using any modern and safe modes of payment at the Point of Sale in your business?

c) What are the modern business trends and practices which you are yet to adopt but have already been adopted by your competitors?

d) What are the modern sales and marketing techniques that you are using for advertising and public relations purposes?

9. Synergies/Value Chain
a) Which businesses or individuals do you currently have mutually beneficial synergies with that are helping you with increased sales and profitability?

b) What businesses or individuals have cancelled their partnership or association with you in a way that has affected the sales and profitability of your enterprise?

c) Are there any possible mutually beneficial synergies which you admire in the market regardless of the industry? What synergies are those and how do you think they are positively impacting the parties involved?

10. Customer Feedback/Complaints
a) What customer feedback mechanisms do you have in place?

b) How do you currently handle customer complaints in your business?

11. Management, Leadership and Supervision

a) What are the decision-making tools which you are using for management, leadership, and supervision in your business?

b) How do you measure or evaluate the effectiveness of your management approaches?

c) Which kind of decisions and responsibilities do you make on your own and which ones do you delegate?

12. Human Resources Management
a) Who is responsible for the day-to-day management of your staff members?

b) How are the staff grievances in your business addressed — is there an in-house mechanism or the service is outsourced?

c) What are some of the grievances that have been raised by your staff members and how have they been addressed?

d) If there are any pending staff grievances, what is the challenge in addressing them?

13. Profit Margins
a) Do you know your cost of sales per product or per month?

b) Do you know whether your business is making profit, losses or it’s breaking even?

c) Do you know the most profitable products in your stock?

d) Do you have any records of the profit and loss statistics of your business or there is no bookkeeping and financial reporting in place?

e) Do you have loss leaders among the products in stock to attract customers? Are there products offsetting the losses?

14. Housekeeping
a) The business world is influenced by energy (charge on matter — electrons and neutrons). A clean environment and a clean has a positive influence on the surroundings while a dirty environment has a negative influence on the environment.

b) If your business place is to be a conduit of positive energy which has a positive effect on customers and their behavior, you must keep it clean, bright, and welcoming.

15. Decision Making
a) Which decision-making tools do you apply in running your business?

b) Who makes the decisions in your business and why?

c) Who has the final say on what is done and what is not done?

d) Always remember that a business is not run on emotions and sentiments, it needs facts. It needs statistics.

e) If you lack a fact checking and statistics gathering mechanism which makes you open-minded like the Smart Decision Toolkit in my book, The Smart Decision Handbook, reality will disappoint you.

Content adapted from the books, The Smart Decision Handbook, The Universal Customer Service Manual and The Practical Executive written by Brian Kazungu — https://www.amazon.com/author/briankazungu

For training and assistance on how to effectively use the Smart Decision Toolkit (Fundamental Congruence Checklist) for research and investigation purposes, contact Brian on — [email protected]