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5 tips to improve the financial management of your business

Financial management of a company can seem like a very complicated task. Organizing all receipts, payments, hiring and bills in the middle of everyday life really is a lot, especially for those who are just starting out and don’t have a specialized team.

But how to keep a company running without having control of cash inflows and outflows? Understanding the sources of income and what the expenses are is the only way to make the company grow.

Starting this work as soon as possible is the best option to get all accounts organized and create routines that allow good financial control.

In this article, we will give you 5 tips on how to improve your company’s financial organization.

What this article covers:

What is business financial management and why is it important?

The first step is to understand what financial management actually is. This concept is linked to all activities related to the planning, analysis and control of the company’s financial resources.

Knowing all revenues, expenses, taxes, debts and investments, closely monitoring cash flow, knowing when to resort to credit lines. Everything related to how your business’s money is used is part of this management.

Carrying out financial management correctly is what guarantees that your company has a chance to grow. It is very common to see people who undertake and have to close the business due to lack of profitability.

The only way to prevent this from happening to a company is to carry out financial control. A common mistake, for example, is for the company to get attached only to billing, leaving aside control of expenses.

Being totally focused on savings and not making any investments that would allow for an increase in demand is another example of poor management.

Therefore, this should be one of the priorities for those who undertake.

5 tips for efficient financial management

You can already see the importance of properly managing your company’s finances, right? The upside is that this is a job any company can do.

Below are some tips on how to facilitate this process for your company.

Financial planning

The best way to start developing financial control for your company is to draw up a strategic plan.

For this, the first step is to know the current situation of the company:

  • Take stock of all receipts from the last few months
  • List and sort all expenses
  • Analysis of the market in which the company operates and competitors

With this data in hand, it will be possible to move on to the next step: defining objectives and goals for the next period. For this, it is important to consider the data collected previously. Goals should always be challenging but also achievable.

With defined objectives, it is enough to draw up an action plan, that is, the tasks that must be carried out by the team to reach the goals.

It is also critical to remember that planning is not something that should be done once and forgotten. Define follow-up metrics to verify that the actions taken are moving the company in the right direction.

Depending on the case, it is important to review this document to adjust the plan over time.

Business budget

The business financial budget is an important part of planning. It is in this document that all the company’s accounts and the financial goals to carry out the defined plan must be included.

With a well-made budget, it is possible to visualize the financial health of the company in a global and also detailed way. By strictly monitoring this budget, you will be able to understand which costs can be cut and where you need to invest more money, for example.

Account analysis

When making your company’s budget you will come across all the bills that the company has to pay. It is through the analysis of these expenses that it will be possible to define what the company’s financial priorities are and thus make it easier to make the decision to cut an expense, for example.

When doing this analysis, remember to classify expenses between fixed and variable costs and expenses. Below we explain better what these concepts mean:

These are expenses directly related to the production of products or services that the company sells.

Fixed costs are those that do not change in relation to production volume, such as renting equipment used in production, for example. Variable costs, on the other hand, vary according to production, such as the raw material of a given product.

Expenses are expenses that are not directly related to production.

Fixed expenses are those in which the amount is repeated over the months, such as expenses with cleaning services, for example. While variable expenses have an impact on sales, such as the sales team’s commission.

Organization of accounts receivable and payable

Knowing well all your company’s expenses and also the income entries, it is possible to organize the accounts to always have cash in hand when making payments.

It is very common for simple disorganization to make the company unable to meet the deadlines of suppliers or bills.

By taking a closer look at the accounts, you can negotiate payment terms for raw material purchases or contracting services, for example. Ensuring that you will always make payments after receiving the amounts related to the sale of your products or services.

Cash flow control

Once you have organized the payment terms, your cash flow problems will probably decrease. But, that doesn’t mean that this control should be set aside.

Doing a daily cash flow follow-up is the best way to ensure you don’t run into the red. Thus, it is possible to predict if it is necessary to resort to a line of credit when making an investment in the company.

One way of doing this is to have a PJ digital account, which gives you visibility into all the company’s financial transactions in real time. This is the case of Cora’s Digital Account, which allows you to take closer control of your company’s finances.

Following these tips, it is possible to carry out a more adequate financial management for companies and maintain the health of the business finances.

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