If you are in business, you know that it is important to figure out how your business is performing. In order to do that, you need to have some means to keep tracks of records as well as interpret the numbers that go along with your business . This is where accounting and financial management come into play . Accounting tools can be used to determine and interpret the financial progress of your business . They can also help you communicate the reputation of your business to important third parties , such as banks and the government .
Financial Management is the process of planning, organizing , regulating and monitoring financial resources with a view to achieve organizational goals and objectives . Accounting performs an important roles as a means of communicating the financial section of a business to others .
The most important function of any accounting system is to generate real data , by which managers and owners can base their decisions . Having numerical facts greatly helps in creating profitable decisions for your business
BENEFIT OF FINANCIAL MANAGEMENT
1 . No more guessing : By sustaining an accounting system , you can improve your possibilities of making the right decision for your business . While the information alone is not the only factor to consider , it does provide one very important piece of the puzzle in your decision making process . Good accounting records show you where you stand financially ,so you won’t have to guess at what your financial position is .
2 . Solve problems : Accounting systems provide reports that help you analyze the productivity and performance of your business . Not only can an accounting system help you make decisions , but it can also help you find areas of your business that need to be improved . Once you are competent to identify trouble areas , you can focus on improving them .
3 . Track complex information : If your business requires any loans, the financial institution will likely require financial reports to understand the net income and net worth of your business . They may also want to rate your financial statements periodically to monitor your ability to repay the loan .Providing this type of information is next to impossible without an accounting system that can provide financial statements .
4 . Good accounting records show where your business stands financially: Use every opportunity available to your business to improve and enhance its performance . Implement and manage your accounting and financial management system , and your business will be on its way to financial success !
HOW TO STRENGTHEN YOUR COMPANY’S
The following are four strategies that will assist you to start building a strong financial foundation and value in your company .
1 . Set up a financial control system
The first thing you need to start with is a control system so that there is consistency in your process and procedures . A control system is designed to prevent and detect errors in your daily activities . For example , is there a standard way of processing your receivables , payables and inventory ? If there are no standard guidelines to follow ,then there is probably no control system .
2 . Have daily access to your account information
Make sure you can access your account information every day ; it is invaluable to managing your cash effectively . If most banks can be providing internet access at a reasonable cost , then there is no reason not to have instant access to account
3 . Budget
It is fundamental , you need to plan for growth and forecast for problems . You need to prepare a budget . Beside completing a budget for expected sales , you should also complete a budget for a disaster situation , like your sales are cut in half . The benefit is very straight forward ; it forces you to ask yourself how you will be able to keep the company running in such a situation .
It will also point to areas
where you may be able to save money right away and free up cash flow . It’s
like having a disaster plan ; you only have to act on it when disaster
strikes , but it is much easier to concentrate when you do not have
a crisis at hand .
4 . Develop a strong relationship with your Bank
Devote attention to building relationships with your bank . Always keep them up to date on where your company stands . If you hit a difficult patch, it is much easier to get your bank on board . Contrary to opinion , banks do not necessarily jump ship as
soon as you fall into trouble . They are willing to work with small business through tough times , and gaining their trust .