Critical thinking skills….I went to a liberal arts college and heard those words often! Guess what? They aren’t just for school! Critical thinking as a small business owner is incredibly important! How many decisions do you think you make in one day? Decisions ranging from marketing, inventory, employment, and financial planning may all be included in one single day’s worth of being a business owner.
Critical thinking involves making decisions based on problem-solving skills versus those knee-jerk reactions we all have. In addition, we all have biases and assumptions that may taint the ability to make clear decisions. Everyone can think and make decisions but doing so systemically isn’t as common. How can we be better decision makers? Here are steps that may be helpful.
1) Identify the problem. That sounds simple but we don’t do it enough! Problems come in large and small sizes. Sometimes they are big and not able to be ignored, other times they are small common annoyances. Take the time to identify what you are dealing with.
Ex. Receipts for billable expenses aren’t being entered in accounting software and therefore aren’t being billed to clients.
2) Gather information. Learn as much as you can about the problem by talking with co-workers/employees, calling vendors, researching your files…anything that needs to be done to get as much information at your fingertips as possible.
Ex. Determine where the billable receipts are getting lost? Are they left in wallets and under car seats or are they in the office but the bookkeeper doesn’t realize they are billable to a client?
3) Evaluate evidence. What did your research find? Make sure your research includes multiple points of view and evaluate potential biases that may be included. Also, consider if your research includes facts or just opinions.
Ex. Talk with the contractors making purchases and talk with the bookkeeper. What system would help them ensure receipts are properly saved and labeled for client invoicing.
4) Consider alternatives. What conclusions can be derived from your research? Use this information to weigh advantages and disadvantages. Think about the costs and benefits of each alternative as well as obstacles. Consider how obstacles can be handled. Go back to identifying the problem…what solution best solves the problem and aligns with the goals of the organization.
Ex. Would a file/envelope system in contractor cars and in the office help solve the problem or would an app or other electronic system be easier and more efficient for everyone involved.
5) Pick the best alternative and implement it. This makes you pick a solution and
then activate a plan to implement. As time progresses, adjust the decision as needed.
Ex. Implement either a manual or electronic system to organize receipts from the contractors to the bookkeeper. Determine a set time to have contractors review client invoices for billable expenses or some other form of invoice review.
There are many decision-making models out there so be sure to look around and see what suits your personality. Taking the time to problem solve will take longer in the short term but provide long-term benefits!
Jordan Ilderton, CPA