Regardless of the size or nature of your business, knowing how to manage the financial sector is a key factor for the success of any company.
It’s no news to anyone that for companies to grow they need to have available resources, otherwise, how would it be possible to buy new equipment, hire new professionals or invest in new technologies ?
Managing the financial sector correctly aims to optimize the use of resources. This makes the company’s processes more efficient, avoiding waste and thus enhancing organizational results.
Check out 5 definitive tips below for managing a company’s financial sector efficiently and boosting your results.
Tips for managing the company’s financial sector
1. Separate personal finances from business finances
The first step to managing your business’s finances efficiently is to not mix personal accounts with company accounts .
Even though it may sound easy, many a businessman has jeopardized the future of his or her company due to removal of too much cash from the cash flow of the company. Never think that it happens only to start-ups or small businesses; it happens everywhere.
Dazzled by the volume of money that circulates in business accounts, many owners of medium and large companies raise their level of spending to a level that does not consider their real financial ability and withdraw it in such a way that will compromise the financial health of their business.
One should always keep in mind that all the money lying in a company’s cash register at any time does not mean profit. Ideal in this respect will always be to set a certain value for pro-labore.
Ultimately, without knowing how to determine correctly the costs and expenses your business produces, how do you know it is profitable or otherwise?
2. Familiarize yourself with technical concepts and terms
Knowing concepts and technical terms from the world of finance is another important step towards making the right decisions and achieving good results in the sector.
For entrepreneurs in charge of managing small businesses, it is very common to have to play several roles. This ends up requiring mastery of concepts from multiple sectors. Here are some concepts that you must master to perform well in managing the financial sector.
→ Billing
It refers to the sum of all amounts collected by a company through the marketing of its products or services. Revenue is synonymous with gross income.
→ Accounts receivable
Amount of capital that customers owe to the company.
→ Accounts payable
Amount of capital that the company owes to its suppliers.
→ Liabilities
These are debts that the company is responsible for paying off in the short, medium or long term.
→ Balance Sheet
The balance sheet shows the company’s financial situation, which includes assets, liabilities and equity.
→ Income statement
It is a report that lists the income, expenses and net profit for a given period.
→ Fixed expenses
These are expenses that are not affected by fluctuations in sales or production volume, for example rent, salaries, etc.
→ Variable expenses
They are linked to the company’s production process and vary according to the decrease or increase in sales. Varied costs can be considered as electricity, raw materials, sales commissions, etc.
→ Accumulated expenses
These are expenses that have been declared but have not yet been paid.
→ Investment
Amount that will be spent with an expectation of future profit, such as purchasing machinery and equipment, expanding physical structure, etc.
→ Cash flow
This application allows you to monitor the company’s financial developments over a given period of time.
→ Working capital
Capital required to finance the company’s main operations, such as operating expenses, raw material purchases, customer financing for purchases made on time, etc.
3. Make a good financial plan
Financial planning is another fundamentally important item in the financial management of any company. Correctly sizing working capital , for example, helps to reduce the likelihood of having to resort to bank loans.
It is important to have a system that allows you to compare expenses and income at different times in order to have an overview of the company’s financial situation in the short, medium and long term and, with this, make more assertive decisions about investments, set goals for the commercial sector, guide the purchasing sector, the production sector, etc.
Controlling and ensuring the efficiency of operations is a fundamental factor for good financial planning. All money that comes in and goes out of the company must be recorded so that the cash flow analysis does not lead to erroneous conclusions.
In addition, just like the sales or production sector, it is important that the financial sector also works on defining and monitoring goals, which must be aligned with the organizational objective.
4. Focus on optimizing financial resources
A careful analysis of the financial situation of most companies usually reveals the presence of unnecessary expenses. No matter how conscientious and lean the management is, through good financial planning it is always possible to find some account that can be reduced in order to optimize organizational results.
In addition to increasing the company’s profits, cutting costs can allow for new investments and strengthening the organization’s positioning in the market.
5. Use the right tool
Although many managers still opt for the good old spreadsheet, there are currently numerous software programs that make managing finances much more practical and objective. And anyone who thinks that the use of these tools is more suitable for medium and large companies is mistaken.
These days, a lot of companies provide solutions for startups and small businesses. This gives managers, who frequently work in several industries, more financial control.
It is simpler to create reports, graphs, and monitor operations when you use the appropriate tool. Additionally, it gives managers a broad picture of the business’s financial status to aid in decision-making.
It is crucial to emphasise that the calibre of the data captured has a direct impact on how effective these technologies are. All accounts payable and receivable must be duly recorded with correct amounts and deadlines. This way, the analysis of the financial situation will be accurate and will not lead to erroneous decisions.