Tip for Effective Financial Management for Small Businesses

by Gena Sanford SEO Executive at eBetterBooks

In some organizations, managers, and leaders fall into the snare of believing that effective financial management is something that the accounting team is fully responsible for. While there are areas such as cash management, payroll, vendor payment, and collecting customer payments that are handled by accountants, financial management is the province of all managers and leaders of the company

Managers are often concerned about this area, they believe that managing finances is difficult and perplexing. The truth is that if you are an expert in your business area, you can excel in financial management. What are the key tips for success? Read on and you will possibly discover something new in this field.

Actively participate in preparing a budget

Most companies now delegate budget responsibility as much as they can. As a result, managers have the opportunity to be actively involved in determining things like:

Sales volumes
Coverage to define payments for vacancies
Levels of customization to deliver sales.
Purchase preferences in terms of products to be used to deliver agreed on volumes
Investment in new equipment or facilities. Or rent equipment.

Don't miss the opportunity to make a budget.

Be clear on your assumptions

A budget is a program for the future based on the best evidence you have at the time of preparing it. You will have to make assumptions about things like sales growth, staff turnover, illness, price, and inflation. Make sure your assumptions are clearly stated when presenting your budgets.

Effective financial management working with your accountant

Your accountant is essentially your business advisor. Work with your accountant from this point of view and you will reap numerous benefits. Your accountant gains a better understanding of the business area and will learn the main revenue and cost strategies. It will be of great help when it comes to reviewing performance throughout the year.

Also, your accountant can model results for you. Based on different positions, it will help you get a clearer picture of the risks that might need to be managed.

Share the budget with your team

As a manager and leader, your success depends on the results of the team. Take the time to share the budget with your team, including the key elements on which it is based. If the team knows what it is aiming for in terms of financial results, it will seek to do the right things operationally to get the best scenario.

Take responsibility

When the going gets tough, it's very easy to start looking elsewhere for excuses. Or blame others. If you have been involved in defining a budget that you have accepted, focus your energies on getting results instead of looking to blame for the current situation.

Monitor performance and take action

Make sure you have a process in place to carefully monitor actual performance against planned performance in the budget. If things are going well, see if there is more you can do to increase performance even more. If, on the other hand, things are not going as well as expected, focus on the changes they need to make or the actions they need to take to get back to normal.

Focus on the most important numbers

When it comes to financial management, managers can sometimes get lost in many details and trivia. Be clear about what 2-3 big numbers to pay attention to, as they will likely determine about 90% of your budget. In most companies this will be:

Income from sales or services
Employee salary costs.
Higher non-salary cost, such as materials

Make sure you understand what these numbers affect at the business unit level so you can stay on track.

At the end of the day, internal financial statements, like budgets, simply reflect what is operationally happening with the money. Stay ahead of the curve with your knowledge, you will have a great opportunity to excel in effective financial management.

If you need experts to manage your books and generate financial documents for your business, eBetterBooks Bookkeeping services can help you. We can even tailor our system to fit the way you do things. Contact us and book a free consultation.