Running Financial Management in Business Activities
Fundamentally, financial management is the practice of making business plans that keep the business focus of each department running well. Solid financial management enables stakeholders to provide data that supports the creation of a long-term vision.
Usually, financial management will also be a consideration for investment-related decisions, including funding sources, liquidity, profitability, and so on. The financial management system combines financial functions such as accounting, fixed asset management, revenue recognition, and payment processing.
Financial Management Function in the Company
Financial management ensures real-time visibility into the company's financial situation while facilitating day-to-day operations such as the end-of-period closing process. Reliable financial management also provides a foundation for good business regulation in between.
- Formulation of strategy as a financial identification for the company to achieve short-term and long-term goals. Company executives also need insight to make good planning scenarios.
- Decision making that can help business executives decide how best to execute a plan by providing up-to-date financial reports and relevant KPI data.
- Controls to ensure each department contributes to the same vision by operating within a budget that is in line with the strategy.
How to Improve Financial Management to Achieve Goals
When financial management runs effectively, all parties in the company can also know the development of the business. To achieve good financial condition, consistent planning, management, and control are needed so that the business can survive. Even though it seems complicated, here are ways that must be maintained so that financial management continues to run well.
1. Have a clear business plan
The business plan will determine the company's journey over the next few years. It can also specify the way the company will determine to finance its business and activities. You can also identify the financing needed and where it comes from.
2. Monitor financial condition
You should monitor the progress of your business regularly. Every day, know the amount of money you have in the bank, the results of sales, and the amount in stock. You should also review your cash flow to understand where you stand against the targets set in your business plan.
3. Ensure timely payment
Businesses can experience major problems due to late payments, especially regarding cash receipts from customers. To reduce the risk of being late or not paying, you should make your credit terms and conditions clear from the start.
You can also use clear and accurate invoice issuance. The use of a computerized credit management system also helps you track customer accounts so that customers pay their bills on time.
4. Know daily operational costs
Even profitable companies can face difficulties if there is not enough cash to cover operational costs such as rent and wages. You have to be able to recognize the minimum needs of the business to survive and make sure you don't fall under those conditions.
5. Update accounting records
You should not risk losing money due to late payment of receivables or late payment of suppliers. With a good record-keeping system, you will be able to track expenses, debts and credits, and apply for additional funds which can save time and cost of accounting.
6. Meet tax deadlines
Failure to meet deadlines for filing tax returns and payments may incur penalties and interest. This may seem trivial, but it can result in unnecessary costs and should be avoided with some forward planning.
Keeping accurate records saves time and money. You'll also be more confident that you're only paying taxes owed. Therefore, it is important for you to fulfill your obligations and maintain a basic record-keeping system in running your business.
7. Get the right funding
Every business has a different type of financial plan according to their needs. Small businesses usually start with private funding, but this may not be the best type of funding for companies either so you should have a potential business financing option.
When facing financial problems, it's a good idea to have alternative help and advice available. It would be nice if this alternative could be used before too much stuff had to be tackled. In other words, seek professional advice as soon as a problem arises.
The financial function in the operational activities of a business may not be something that everyone can understand. However, it is important for every stakeholder in the company to be able to learn various types of financial reports to the concept of accounting reporting through the Finance for Non-finance Professionals program which can be followed at prasmul eli.