BUSINESS
How To Improve FINANCIAL MANAGEMENT at Your Business? Financial management is essential to businesses of any size. Whether you’re a new business owner or have been in business for a while, it’s vital to have the proper financial management in place. For small business owners, understanding your financials is a vital part of running your business. However, it is easy to get bogged down in managing the day-to-day operations of your business and neglecting the financial side of things. Don’t let this happen to you! Here are some of the most important things you need to know and some tips about improving financial management at your company. Your business is like a living, breathing entity. It needs proper care and feeding to keep it running smoothly. However, while managing a business is a 24/7 job, it doesn’t mean you should always be thinking about it! One way is to manage the company finances properly.
Financial Management First and foremost, it’s essential to have a clear understanding of what “financial management” means – and the best way to do that is by understanding the three main components of the process: Financial Planning, Budgeting, and Reporting. Financial planning is about understanding 60
how much capital your business (or any initiative or project) would require, how much it would return, and how to finance it. Budgeting is the process of defining how much to allocate for any project or initiative in the forthcoming financial year, essentially bringing to life the Financial Plan. The Financial Plan and the Budget are tightly linked to your strategy. Finally, Financial Reporting is about tracking where your money goes and use this evidence to have, on the one hand, more control over it and, on the other, to make changes during the year or even review your budget. I have listed the three components of financial management by a sort of “logical” order: you define your strategy first, then consider various initiatives to execute upon it, select the best ones and budget for it, and finally, you track and report. However, there is a catch-22 to solve first, as planning and budgeting require a good knowledge of how you’re currently spending your money. Furthermore, you surely can’t stop the business to plan and budget, and while a company runs, money keeps flowing.
So, what’s the best place to start? I always recommend starting with the basics, which means beginning with
Financial Reporting. You need to control your finances and make sure you are doing everything you can to make sure your business is prospering. C
Start monitoring and reporting the monthly spending and income for your business. It is a straightforward way to gain visibility and control over how you spend your money. You can learn how much money you’re making on the various income streams in your business and how much you’re spending on each one. When you know how much money you are spending on each area, you can make more rational decisions when investing in the next project or initiative. It will help you understand your overall expenses and adjust accordingly. But it’s not just about managing the income and expenses.
The Importance of Financial Management Because of the importance of your business’s finances, you need to keep track of things throughout the year. It means remembering to pay your suppliers, putting money aside for taxes, and keeping track of your expenses. And although it may seem a little overwhelming at first, tracking your finances isn’t that hard. It’s just a matter of breaking your finances down into easy-to-follow categories. You can do this by creating lists of every bill you pay
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