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WHAT IS ‘GOOD’ FINANCIAL MANAGEMENT AND HOW CAN YOU ACHIEVE IT?

Good financial management matters. Let me say that again, it matters!  

Put it like this – lack of, or poor financial management is one of the top 3 reasons for business failure. 

But what exactly does “financial management” mean?   

Every business needs more resources to increase capacity, efficiency, and quality to serve more customers, earn more revenue, build a financially stable business, and ultimately grow. And it’s good financial management that helps business owners make decisions on how to prioritise these resources. 

Many business owners have an accountant that perhaps manages their tax return, maybe their bookkeeping and BAS returns, but when it comes to financial management, those are only a small part of the puzzle that enables a business to really thrive. 

And of course, there are many elements to this such as decisions on: 

  • Whether to raise capital and how.  
  • If borrowing money is an option and the implications of that. 
  • Along with setting financial goals and analysing data. 
  • And crucially, having control of budgets and prioritising resources. 

Within these rather large topics, there are a myriad of day-to-day actions to consider such as cash flow management, invoicing and receiving monies from customers, paying suppliers for goods and services, paying the ATO (on time!) and all record keeping and compliance requirements.  

You can see why merely tax and BAS returns really don’t scratch the surface and why financial management can become a huge overwhelming burden for many business owners and unfortunately can become their downfall.  

But what can you do to ensure your business has strong financial management processes in place? 

Put simply, I believe this is one area that benefits from a professional. In the same way as you use a tax accountant to ensure your tax return is accurate, a financial management accountant can assist with planning your business financials to ensure you don’t go bankrupt!  

However, there are a few things that every business can do to set themselves up for success and ensure that if they do work with a financial management accountant, some basic systems are in place ready for them to refine and improve on and move the business forwards.  

My top 3 tips are as follows: 

1.  Invest in accounting software

This can save so much time and the monthly cost is negligible when you measure the time it will save and the mistakes that are avoided.  Accounting software is great and provides a snapshot of your profit and loss, can provide budgeting capability and see easily where costs can be reduced, or sales need to improve. The data is invaluable and gives you greater visibility of what is happening in the business and will allow you to make more informed decisions

2. Document systems, contacts, and routines

This could be as simple as a supplier directory noting down what payment terms you have agreed with them. Any payments that are needed, note down who manages this, how and in the event of a mistake or query, what should happen.

3. Have a business plan 

This does not need to be war and peace, however a business plan will force you to consider your company’s core business activities, objectives, and how it plans to achieve its goals.  A useful business plan should include an executive summary, an outline of all products and services, an idea of your marketing strategy plus financial planning, and a budget!

As a Management Accountant specialist, I love to work with businesses and improve their bottom line through a blend of education and action – quite often it might start with a business plan. Whatever stage you are at, be it start up or more established and ready for growth, if you believe you would benefit from better control of your finances or systems aren’t quite as efficient as they should be, drop me a line. I offer no obligation initial consults where I can understand more about your business and where I can help – https://calendly.com/fincraft/30min book in here or drop me a line at [email protected]