Proper financial management and its business implications
The term “financial management” refers to the science of money management, which entails planning for the future of a business enterprise, includes the administration and maintenance of financial resources at disposal, and covers the process of identifying and managing risks.
So how can you ameliorate the financial health of your business for sustainability and growth?
Develop your financial knowledge by: 1) attending trainings on financial management basics, cash flow management, and record keeping essentials, to take control of your finances; 2) learning the terminology to better understand your financial statements; and 3) asking your accountant and/or business advisor more specific and crucial questions that increase your financial literacy.
Ensure good bookkeeping by recording daily transactions, closing books every accounting period, and preparing financial statements, in order to analyze your business activities, meet your reporting requirements, and attract investors, in an efficient and effective manner.
Optimize your cash flow through aligning payables and receivables payment terms, planning your cash needs for the next quarter, year, and several years out, watching and reducing your payroll, occupancy, and other costs, evaluating your tax situation, diversifying your customer base, and setting up cash management policies.
Closely analyze your financial position using key financial ratios and calculations such as sales calculators, profit ratios, liquidity ratios, finance ratios, and efficiency ratios, so as to easily monitor the different areas of your business, and successfully detect any potential problems!
Proper financial management is of the utmost importance for any business regardless of its size, and is key to its overall success and sustainability!