5 key reasons why great financial management is so important
What is financial management?
Financial management is usually more than keeping an eye on the accounting records. This is an important part of when you are managing your organisation. This is not something that can be left to finance staff or any honorary treasurer. Financial management usually involves organisation, planning and monitoring to ensure that the organisational objectives are met.
You will need to have a solid organisational plan to ensure that your financial management is effective. You will need to put in strategies that have been agreed and policies that have been picked to achieve this objective. The financial planning should be part of the long term planning process.
The financial team will need financial risk management training to ensure they are fully equipped for the role. They can take a financial risk management course to keep their knowledge updated. London TFE offer FRM course for anyone that would like to upscale their skill set.
The benefits of good financial management
There are many ways good financial management can help your organisation, such as:
- You will use the forward financial planning to your advantage to gain an upper hand over competition.
- You will be more accountable to your stakeholders and donors.
- You will gain the respect from other partners and funding agencies.
- You can usually prepare for the long term financial sustainability with good financial management.
5 key reasons why great financial management is so important?
- When you are running a business you need to make sure that the rent, utilities, payroll and insurance is paid. With excellent financial management you can look into the future to see when your accounts receivable and outstanding bills are due. You may want to decrease the time in which customers pay you to ensure that you have a good cash flow. If the cash flow is not managed correctly you may not be able to keep the company operating.
- The capital expenditure will need to be taken into consideration as the balance amount of income will produce the amount it will cost. If you manage the capital expenditure correctly then there will not be a time where you overextend your company by borrowing too much money.
- Financial management helps keep your costs as low as possible. If the costs are not monitored and managed your company will always have to increase sales dramatically to pay the rising expenses. To keep the costs down you can ask your vendors to lower their prices or reduce your employees.
- Your responsibilities as financial manager also spans to tax and VAT payments. This is to make sure that you have enough cash to pay tax and VAT each quarter. The money needs to come in before the bill is due. Failure to plan ahead can cause your company to spend more on taxes
- Having a great financial management plan can help pacify the shareholders and stakeholders. They will expect plans on how the company is due to prosper in the future.
Not sure about the financial risk in your business? Why not enrol on our financial risk management course today!