Every company has financial transactions and, therefore, it is extremely important that all of them pay special attention to this sector. Therefore, financial management has been a partner when it comes to managing this area.
Financial management encompasses administrative analysis actions that aim to plan and control activities involving a company’s financial resources. These procedures aim to ensure that resources are used efficiently.
Therefore, corporate financial management is essential in any business, regardless of its size. It allows the organization to grow strongly, keeping all financial activities up to date, and enabling new investments.
FINANCIAL MANAGEMENT
We can summarize the concept of financial management as practices to control the use of all the money that circulates in the company. In other words, it is a sector that analyzes data, controls expenses and makes plans so that all financial transactions bring benefits.
To get an idea of the importance of financial management, there are already higher education courses in this area, training professionals to deal with everyday situations in the sector. Financial management is not a mechanical activity; therefore, the professional must be prepared for various situations.
It is financial management that allows companies to control their profits and build plans and goals, such as:
- Recruitment of labor
- Machinery purchase
- Acquisition of new spaces
- Investment in inputs, among others
Importance of Financial Management
One of the most essential sectors in a company is financial management, regardless of the industry or even the size of the organization. This sector will control the use, whether incoming or outgoing, of the company’s financial resources.
This control allows the organization to grow, whether by investing in people and machines or in space. In other words, this sector allows the company to plan goals and have the means to achieve them.
Furthermore, controlling a company’s finances reduces unnecessary expenses and helps avoid losing money on investments that do not bring returns.
Financial management is always necessary, especially during periods of economic and political crises that can have direct and indirect effects on cash flow. It helps control working capital and prevent financial setbacks.
FUNCTIONS OF FINANCIAL MANAGEMENT
We can divide financial management into a few functions or activities that, together, make actions produce results. They are:
- Controllership
- Financial planning
- Asset management
- Liability management
Controllership
This is where the professionals who take care of and control the company’s budget come together. They are the ones who analyze and monitor all activities involving the organization’s resources, analyzing risks and predicting potential problems.
Financial planning
Planning is the area of financial management that predicts actions and indicates the directions that the organization must follow to achieve the desired results. This is where the goals and deadlines for actions to take place come from, always with financial security in mind.
Asset management
This function brings together actions that seek financial returns based on all of a company’s assets. It uses data on opportunities and weaknesses to generate financial returns for the company.
Liability management
This section examines the finances of a business. In this case, the goal is to guarantee lower financial risks, lower needless costs, and higher liquidity gains.
EFFECTIVE FINANCIAL MANAGEMENT
While financial management may differ from company to company due to varying sizes and sectors, it is one very important aspect of an enterprise of any kind. These pointers can assist you in managing your finances well in any industry.
Have good financial planning
Planning is essential for any area of any business. Therefore, always start by having a good plan. Draw up a plan to divide investments so that each area receives the necessary attention, both financially and personally.
A company can have several areas, so drawing up a good plan will help at this stage. In addition, financial planning can help define realistic goals and strategies to achieve them.
Invest in technology
Technology makes life easier, both personally and professionally. That’s why investing in financial management platforms can make a big difference. These software programs make it faster to find information, allowing for a more agile process.
Automate processes
Automating demands has been a great solution for companies that want faster and more efficient activities. In addition to streamlining processes, by automating processes, the company can reduce expenses, allowing capital to be left over for other types of investment.
Have good professionals
Having qualified professionals in their fields is essential for good financial management. Hire experienced professionals or invest in training your employees. If necessary, invest in a company that does this type of management.
Revenue predictability
This tip applies to businesses that offer services that are used on a recurring basis, such as food companies and streaming platforms. The financial management of these businesses can be based on monthly recurring revenue (MMR), allowing for more effective planning.
FINANCIAL MANAGEMENT MISTAKES
There are some mistakes that are made that can compromise good financial management. Let’s look at the most common ones so that you never make the same mistake again.
Leave everything on one platform
Using just one platform, such as spreadsheets, can be very dangerous, because these files can end up becoming disorganized. Investing in platforms that have specific purposes is the best way to ensure good financial management.
Have a single account
Having just one account for all of your company’s financial management can be dangerous, even for small businesses. In this account, your personal and investor investments and profits will end up getting mixed up. Therefore, have different strategies or even accounts for each purpose.
Wrong priorities
Knowing your business is essential. Investing resources in the wrong place or at the wrong time can be detrimental to your company’s finances. If you’re just starting out, try to invest in customer acquisition first.
Poor inventory management
This is one of the most common mistakes made by those who work with the sale of physical products. Poor inventory management, whether due to a lack of space, professionals or tools, can be detrimental to the business. Therefore, always invest in inventory and product delivery processes.
