Good financial management
Good financial management
Good financial management is essential to the survival and success of every business. Unfortunately, many small business owners have relatively limited exposure to financial management and are unaware of how strategically important it is to their business’s performance.
In general, financial management deals with the procurement of funds for a business and the effective use of those funds in the operations of the business. It also involves using accounting numbers to measure the financial health of a business, to understand the reasons for the current financial position, and to make strategic decisions that will improve the general performance of the business.
The best way to demonstrate the importance of good financial management is to describe some of the tasks that it involves:
• Taking care not to over-invest in fixed assets
• Ensuring that there is a sufficient level of short-term working capital to sustain and manage accounts receivables and inventory
• Setting sales revenue targets that will deliver growth
• Increasing gross profit by setting the correct pricing for products or services, reducing the costs of raw materials, negotiating supplier prices, and managing other factors that influence the costs of production or service provision
• Controlling the level of general and administrative expenses by finding more cost-efficient ways of running the day-to-day business operations
• Tax planning that will minimise the taxes a business has to pay
• Managing employee benefits
• Performing financial analysis using numbers generated from financial statements.
Good financial management begins with a solid book-keeping system that will allow for the production of accurate financial statements. It requires knowledge of how to use the figures in the financial statements to the business’s advantage. For example, a good financial manager should know that a positive net profit and an increase in sales does not automatically translate into financial success. If the business’s borrowed capital has increased at a rate higher than the increase in profits or sales, it means the company is financially worse-off than it previously was. Are you and your management team aware of this?
There are many other strategic mistakes that managers who are unfamiliar or untrained in financial management make. Over time these mistakes can become detrimental to a business’s success and survival so it is crucial that you learn as much as possible about how to financially manage your small business. If you have trouble with this, you may want to consider soliciting the services of a professional who knows the ins and outs of the process.
For more information on financial management, have a look at my article “Impress your bank manager! How to read your profit and loss account report”.
Good financial management - To learn more about this author, visit Mark Gwilliam's Website.
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Why good financial management is so essential
Good financial management is essential to the survival and success of every business. Unfortunately, many small business owners have relatively limited exposure to financial management and are unaware of how strategically important it is to their business’s performance.
In general, financial management deals with the procurement of funds for a business and the effective use of those funds in the operations of the business. It also involves using accounting numbers to measure the financial health of a business, to understand the reasons for the current financial position, and to make strategic decisions that will improve the general performance of the business.
The best way to demonstrate the importance of good financial management is to describe some of the tasks that it involves:
• Taking care not to over-invest in fixed assets
• Ensuring that there is a sufficient level of short-term working capital to sustain and manage accounts receivables and inventory
• Setting sales revenue targets that will deliver growth
• Increasing gross profit by setting the correct pricing for products or services, reducing the costs of raw materials, negotiating supplier prices, and managing other factors that influence the costs of production or service provision
• Controlling the level of general and administrative expenses by finding more cost-efficient ways of running the day-to-day business operations
• Tax planning that will minimise the taxes a business has to pay
• Managing employee benefits
• Performing financial analysis using numbers generated from financial statements.
Good financial management begins with a solid book-keeping system that will allow for the production of accurate financial statements. It requires knowledge of how to use the figures in the financial statements to the business’s advantage. For example, a good financial manager should know that a positive net profit and an increase in sales does not automatically translate into financial success. If the business’s borrowed capital has increased at a rate higher than the increase in profits or sales, it means the company is financially worse-off than it previously was. Are you and your management team aware of this?
There are many other strategic mistakes that managers who are unfamiliar or untrained in financial management make. Over time these mistakes can become detrimental to a business’s success and survival so it is crucial that you learn as much as possible about how to financially manage your small business. If you have trouble with this, you may want to consider soliciting the services of a professional who knows the ins and outs of the process.
For more information on financial management, have a look at my article “Impress your bank manager! How to read your profit and loss account report”.
Good financial management - To learn more about this author, visit Mark Gwilliam's Website.
Like this article? Share it with your friends
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David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
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Dave KurlanDave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website |
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Cheryl MatthynssensCheryl is a life skills coach, licensed Chemical Dependency Counselor and a 20 year entrepreneur. Cheryl's dedication to achieving a life of balance led to her expanding her teaching from the simple managing of life's daily challenges to adding financial well being as well. A direct marketer with DrinkACT, she is gaining ground in the online community with her concepts of making sure business owners, entreprenuers and employees have well rounded life styles. She opened up a small affiliate site - The Balance Guide- to help others find resources for mental and emotional well being. Visit Cheryl's blog to see more of the diversity beyond business she has began offering online at www.thebalanceguide.blogspot.com - Visit Cheryl Matthynssens's Website |
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Linda RichardsonLinda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website |
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Stephanie RobeyStephanie Robey is President and CoFounder of Pivot Positive, LLC - an Internet marketing business focused on helping people start work at home ventures. Previously, she was employed at The Search Agency with over 20 years experience in graphic design and 10 years experience in online marketing. She was responsible for launching the Conversion Path Optimization (CPO) unit where she and her team have conducted hundreds of optimization tests for online companies across multiple verticals. She is a successful entrepreneur having started and sold 2 companies and remains on the board of directors of the third, PhotoSpin.com Stephanie began her career in the direct marketing realm creating and producing direct mail for many of the major cable television companies and directly attributes her understanding of Internet marketing to those early offline experiences. Stephanie is a graduate of San Diego State University with a BFA in Graphic Arts and also holds an Executive MBA from the Graziadio School of Business and Management at Pepperdine University. Read Steph's Blog Meet Steph and Dave Sign up for our Free 7-Day BootCamp: Self Employed & Rich - Visit Stephanie Robey's Website |
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