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Plan Your Financial Roadmap: 9 Tips for Financial Management
Effective financial management will likely lead your business to financial success. Plan your financial roadmap with these 9 money management tips.
How do you define financial success for your business? To some, it means always having enough funds for the organisation. To others, it means being able to invest in the company’s future. Regardless of what it means to you, we know one thing for sure: Our nine money management tips below will help you achieve it. Let’s understand more about financial management.
What Is Financial Management?
Financial management, when simply defined, covers organising, planning, controlling and directing a business’s financial activities. Essentially, it’s the process of creating a finance plan and making sure that all departments are on track with their spending.
With that, its objectives are the following:
- To ensure that the business uses funds in the most optimal way
- To ensure adequate returns to shareholders
- To ensure an accurate and adequate supply of funds
- To ensure financial safety
- To ensure compliance and maximise profits
Tips for Achieving Financial Management
Managing finances is at the root of all major business decisions. Financial management impacts a business’s stability and, inevitably, financial success. Check out these financial management tips that can help you achieve financial success in business.
1. Diligently update your business finance records
The foundation of effective financial management is in the accuracy of finance and accounting records. An updated set of records allows you to have an overview of how you’re managing your business’s finances and saves you a lot of time when working on your taxes, funding, audit reports, forecasting, budgeting, grant management or any other activity that will help your business grow.
2. Don’t just read the financial statements—understand them
Financial statements are documents that give internal decision-makers, investors and suppliers an idea about your business’s financial health. This is why you—before anyone else—should fully understand what those documents mean.
The three main financial statements you should understand are:
- Balance sheet — A balance sheet summarises your assets, liabilities and equity. A look at your balance sheet should show you whether what the business owns is more than what it owes.
- Cash flow statement — A cash flow statement shows how much your business has spent and earned in a certain period.
- Profit and loss statement — A profit and loss statement shows you the income that comes in, the expenses that go out and, most importantly, the profit that you’ve made.
3. Build up the company’s savings
It could take time, but it helps to build up the company’s savings. Doing so ensures that the business will remain profitable and has all the necessities to grow. We recommend having an emergency fund that you can rely on when unwanted circumstances come up.
4. Know your business’s goals
You can’t know if you’re successful or not if you don’t know your goals. Set SMART goals—specific, measurable, achievable, relevant and time-bound—so you know where you’re headed and how far you’ve reached.
5. Set a realistic budget that reflects these goals
Your budget should be able to answer questions such as, “What are my financial priorities?” and “Am I tracking towards my business’s goals?” Allow your budget to help you see what you can and can’t afford so you can protect your business finances.
You can also refer to forecasts to anticipate and plan for any challenges that may affect your budget.
6. Pay the bills on time
This may be a no-brainer, but you’d be surprised by how many people pay their bills way past the deadline. Keep in mind that paying bills on time allows you to prioritise essential spending. Think of it this way: When you get the bills out of the way, you won’t have to worry about anything else when you plan your business expenses. Paying bills on time also improves supplier relationships, gives your business a good reputation and avoids disconnections.
Plus, a payment history that shows no delays can boost your credit score and improve your interest rates.
7. Prioritise projects that make the most money
We know you’re working on a million things with your business, but learn to prioritise by focusing on the ones that bring in the most revenue.
For example, instead of spending 8 hours matching invoices with receipts and purchase orders, get an automated expense management platform to do that for you. That way, you can spend those 8 hours finding new leads for your business instead. Imagine the difference!
8. Audit your company expenses
Auditing your expenses gives you a better understanding of what happens to your company finances. Where are they going? How often does this happen? Are they being used as intended?
An audit will also help you better understand your needs, recognise spending patterns, find out where to improve and prevent fraud.
9. Use expense management software
Financial management is not so tough, especially when you have expense management software to help you perform these successful financial strategies.
One of the best things about this is its real-time visibility that shows you all the vital information you need—right as the spending happens! You get a better view of your financial health and make informed decisions along the way.
No matter what financial success means to you, it always goes back to how you manage your finances. Keep these tips for financial management in mind as you go on with your business and notice how much they improve the business’s financial health.