Prosperous Business through Financial Management

A safe-sounding business requires an effective financial Management. This management does not only include keeping accounting records but is essential to the company’s growth expectancy. Upon creation of business visions and objectives, financial management takes into action and achieve those visions through planning, organizing, controlling, and monitoring financial resources.

The business should upright encourage to see the advantageous benefits of an effective financial management.

Management of finances benefits would be:

• To have an effective and efficient use of resources.
• To see objectives being met and fulfilling stakeholder’s demands.
• To establish an accountable standing to donors as well as to other stakeholders.
• To receive respected status among funding agencies, partners, and beneficiaries.
• To have an advantage edge on the increasingly scarce resource situations.
• To compose a long-term financial sustainability to withstand unwanted circumstances.

Seeing how much progress you could achieve with an organized financial management was the best take away you could get in the business. But how does it happen? What should be done to acquire such promising end results?

Financial success should involve strong cash position, creation of a healthy balance sheet, and sustaining profits. These results don’t just happen through hope it should be accompanied with financial discipline. To successfully manage your business, here are different keys to a successful financial management:

Status update from Financial Management Ratios

In most scenarios, Companies felt safe if the sales are good and concluded that all else are in order. But little did they know that situations such as this are reasons why companies fail. In reality, a healthy sales growth could still be headed to a financial disaster. To avoid such circumstances, it would be ideal to pay attention to the ratios that defines the true status of the business.

These ratios could come from the balance sheet. The balance sheet is a day-today basis, wherein updates and changes are being applied daily. This sheet could produce the three most important ratios in such are: Current ratio (Current assets/current liabilities), Quick ratio ([Cash + receivables]/current liabilities), and Debt-to-quality ratio (Net worth/total liabilities).

The current and quick ratios are reliable on surviving a short-term financial crisis. And the debt-to-equity ratio gives the company the ability to withstand the long-term finances. Though these three ratios may show a decline of status and the sales and revenues continues to climb, it would be ideal to determine what causing the state and be addressed to.

Cash Flow Management

For starters, cash flow signifies the health of the business. It would be ideal to have a better understanding to how the money is being used in the business. To be able to gain knowledge of how the money circulates in the business, here are four tips to guide you in keeping track of the status of your cash:

Reviewing cash flow statement on a monthly basis. Doing this on a daily basis for companies suffering from cash flow conflicts.

Make it a point to keep a formal book for your receipts and disbursements and check to see if outgoing and ingoing cash are being manipulated accordingly.

Check the amount of money at hand and make a graph or a plan for situations such as money coming in came to a halt.

Foresee how much capital should be raised for the next one or five years.

Forecasting

A progressive business should establish long-term forecasting approach to show the business’ status in the next three to 5 years. Forecasting helps the company in determining the future trends in sales performance, finances, and even customer behavior. It would be ideal to create forecasts on a quarterly basis to see if the past approaches are successful or change for the better.

We all know that forecasting is not an easy task and this takes time to produce right predictions. It would be best to require the following information for production of an accurate figures as possible:

• List of all the fixed costs. These may include rent, phone, employees’ salaries, the internet, hardware, software, etc.
• List of all variable costs. These may include raw materials, wages (payment has a basis for example per hour), fuel, etc.
• Externals factors such as new contracts/negotiation, terminating contracts, staff changes and other business-related factors that might affect in the forecasting creation approach.

Though forecasting may not guarantee of the foresaw figures to be met, being knowing of what lies ahead gives you the edge among your competitors.

If handling your own financial management is holding back the company to progress, I think it would be best to outsource and acquire financial management services in order to stay on track and keep the cash flowing in the business.