The financial management side of a business is crucial to its success, growth, and long-term survival. It’s a meticulous process entailing planning, organizing, controlling, and monitoring financial resources to achieve objectives – both in the long and short run.
Proper financial management enables a business to effectively use resources, acquire competitive advantages in the market, uphold commitments to stakeholders, and prepare for financial stability.
However, many companies in the modern age are overly lax in this area. They don’t consider all parts of the economic sphere thoroughly – and that can easily lead to their avoidable downfall.
To prevent a business from falling into monetary chaos, compressive financial management needs to be a key player within a firm’s ongoing plans, providing clear, actionable insights based on risk assessment, predicted projections, and, of course, common sense. This may sound tricky and even downright confusing – especially for first-time business owners – but it doesn’t have to be.
With this in mind, entrepreneurs and managers in the commercial sector should consider the following tips when looking to fine-tune their company’s financial management. Doing so could help them gain control and stay in the driver’s seat.
1. Craft a Clear Business Plan
A business plan establishes where a business is and where it needs to get to – be it over the next few months or the coming years. This plan must detail how a business owner will finance their company and all of its activities, detailing what funding will be needed for what, as well as where it will come from.
2. Get Money Savvy (Or Hire Someone Who Is)
Having someone knowledgeable on the broad spectrum of finance is always preferable. How can a company tackle financial management without an employee with the skills to do so at the helm?
Ultimately, business owners with financial experience and credentials will do well in this domain; however, all is not lost if they don’t have the required knowledge and skills that the finance field demands.
Getting a master’s in business management online degree can help build the competencies needed to stay on top of a company’s overall management, including money matters. Alternatively, employing someone with this qualification or enrolling a staff member in the program to complete alongside their job can grant a similar effect.
3. Monitor Financial Position
Business progress needs to be monitored on a daily basis, affording whoever is in charge of the finance department clear cash flow information comprising how much money is in the bank, how many sales are taking place, and details on the company’s stock levels. Additionally, the company’s target projections must be reviewed against those set in the business plan – ideally, month to month.
4. Know Daily Costs
It’s not just about monthly operating costs like many company owners assume; numbers need to be crunched for the everyday. Without enough funds to cover everyday expenses, including employee salaries, freelancers, rent, and other daily fees, even the biggest and most profitable businesses will fail. Therefore, financial managers and business owners must be aware of the minimum their company needs to stay afloat, making sure money doesn’t dip below this figure.
5. Ensure Timely Payments
Businesses can face unforeseen difficulties in the event of late customer payments. In order to minimize the risk of late or even flat-out non-payment entirely, credit terms and conditions need to be made clearcut and apparent from the customer’s get-go.
Invoices should also be clear, simple, and accurate. They should also include the business’s contact details, enabling clients to contact the customer service team if they have any queries or issues with payment.
For this particular area of a business, using a computerized credit management system may be ideal, allowing those responsible for a company’s finances to keep track of customer accounts with greater ease.
6. Maintain Accounting Records
When a business’s accounts are not kept up-to-date, losing money by failing to keep up with late customer payments and missing when suppliers need payment is a major risk. However, an efficient record-keeping strategy will help businesses track expenses, debts, and creditors, thus saving time, money, and accountancy costs. Plus, a good accounting system can even be helpful when applying for funding.
7. Meet Tax Deadlines
Every business has to file tax returns and fulfill payments – but doing these late or even incorrectly can incur hefty fines and interest on top in some instances. Still, these problems and their unnecessary money drains are wholly avoidable so long as proper planning and action are taken well in advance.
By maintaining accurate records coupled with efficient planning, businesses can save time and money, not to mention their higher-ups can rest easy in the knowledge their company is paying the tax it owes – nothing more, nothing less.
8. Control and Optimize Overheads
Business premises not running efficiently means the company isn’t reaching its potential because wasting resources and energy results in unnecessary financial loss – but changes to behaviors and systems can reduce said waste.
To cut costs, companies must ensure their staff is properly trained in properly using the equipment and its maintenance, which helps it last longer while minimizing a workplace’s utility bills – such as electricity and gas.
Specific areas to investigate in a standard office include lighting, heating, air conditioning, and office equipment, all of which need to be optimized to prevent funds from needlessly going down the pan.
9. Control Stock
Stock control ensures a business has the optimum amount of stock available at any given time, ensuring capital is not tied up when it doesn’t need to be. Control systems must be put in place – ones that specifically track stock levels. In doing so, a firm not only maintains the right stock levels but also frees up much-needed cash that could be better pumped elsewhere.
10. Get Correct Funding
One of the most important sections in a business’s back pocket is the type of funding used to feed the overall firm. A number of different financing options exist within this pressing financial decision, and selecting the right one for a particular company is essential for success since each type is designed to suit different needs and situations.
Generally, smaller companies tend to rely on personal funding and business overdrafts, although these may not be suitable for larger firms or those operating in certain niches.
In any case, researching the numerous funding types first before opting for the ideal one is always a wise move.
Final Thoughts
The unforgiving and challenging business world is unpredictable at best; anything can happen – but many woes are actually foreseeable and preventable with effective financial planning and management. No matter whether a business is a high-flying corporate conglomerate or a tiny one-person band, the tips outlined in this article should help business owners and managers achieve greater, organized financial success with their firm’s finances.
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