Five Strategies To Strengthen Financial Management Of Your Company
Too many businesses wait until a crisis occurs before they start to focus on improving their financial management. Often, by that time, it can be too late. By setting aside an hour now to evaluate the strengths and weaknesses of your company’s financial management activities and systems you can save a lot of time and aggravation. It can also help increase your profits, and at the end of the day that is what it is all about.
The following are five strategies that will help you start to build a strong financial foundation and build value in your company.
1. Strategies To Strengthen Financial Management: 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 is a standard way of processing your receivables, payables and inventory? If there are no standard guidelines to follow, there is probably no control system.
2. Strategies To Strengthen Financial Management: Have daily access to your account information
Make sure that you can access your account information every day; it is invaluable to managing your cash effectively. With most banks providing internet access at a reasonable cost, there is no reason not to have instant access to account information.
3. Strategies To Strengthen Financial Management: Manage your cash components
Concentrate on managing your three main cash components: accounts receivable, accounts payable and inventory. Read about how to Manage Cash Components
4. Strategies To Strengthen Financial Management: Budget
It is fundamental, you need to plan for growth and you need to forecast for problems. You need to prepare a budget. Besides 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.
5. Strategies To Strengthen Financial Management: 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 if they understand your business. 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 to do so is much easier the more confidence they have in you and your company. They way to accomplish this is to be transparent in your dealings and to give them timely financial information.
Use your bank as a resource for cash management. There are products available that can increase your cash flow, or arrangements that can be put in place to increase your interest returns. But you still need to make sure they are cost effective.
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