| Good financial management is essential to the | | | | minimise the taxes a business has to payo |
| survival and success of every business. | | | | Managing employee benefitso Performing financial |
| Unfortunately, many small business owners have | | | | analysis using numbers generated from financial |
| relatively limited exposure to financial | | | | statements. |
| management and are unaware of how | | | | Good financial management begins with a solid |
| strategically important it is to their business's | | | | book-keeping system that will allow for the |
| performance. | | | | production of accurate financial statements. It |
| In general, financial management deals with the | | | | requires knowledge of how to use the figures in |
| procurement of funds for a business and the | | | | the financial statements to the business's |
| effective use of those funds in the operations of | | | | advantage. For example, a good financial manager |
| the business. It also involves using accounting | | | | should know that a positive net profit and an |
| numbers to measure the financial health of a | | | | increase in sales does not automatically translate |
| business, to understand the reasons for the | | | | into financial success. If the business's borrowed |
| current financial position, and to make strategic | | | | capital has increased at a rate higher than the |
| decisions that will improve the general | | | | increase in profits or sales, it means the company |
| performance of the business. | | | | is financially worse-off than it previously was. Are |
| The best way to demonstrate the importance of | | | | you and your management team aware of this? |
| good financial management is to describe some of | | | | There are many other strategic mistakes that |
| the tasks that it involves:o Taking care not to | | | | managers who are unfamiliar or untrained in |
| over-invest in fixed assetso Ensuring that there is | | | | financial management make. Over time these |
| a sufficient level of short-term working capital to | | | | mistakes can become detrimental to a business's |
| sustain and manage accounts receivables and | | | | success and survival so it is crucial that you learn |
| inventoryo Setting sales revenue targets that will | | | | as much as possible about how to financially |
| deliver growtho Increasing gross profit by setting | | | | manage your small business. If you have trouble |
| the correct pricing for products or services, | | | | with this, you may want to consider soliciting the |
| reducing the costs of raw materials, negotiating | | | | services of a professional who knows the ins and |
| supplier prices, and managing other factors that | | | | outs of the process. |
| influence the costs of production or service | | | | For more information on financial management, |
| provisiono Controlling the level of general and | | | | have a look at my article "Impress your bank |
| administrative expenses by finding more | | | | manager! How to read your profit and loss |
| cost-efficient ways of running the day-to-day | | | | account report". |
| business operationso Tax planning that will | | | | |