Are you the type who thinks that financial management of your business is only the job of your accounts team and that they are fully responsible for it? If you are a manager or a business owner you may not be involved in payroll, cash management, paying vendors and suppliers, or cash management, but if you want to avoid unexpected hitches and ensure smooth sailing in the aspect of your business finances , you should learn to have a grasp on financial management.
Here are a few tips:
Participate in setting the budget
You own the company so you have every right to determine sales volumes, buying preferences, investment in new facilities, equipment, staffing to deliver the sales or cover vacancies and other things which would come under the purview of the budget. Play an active role in determining your budget.
Be clear in your forecasts and assumptions
Your budget is essentially the financial plan for the future based on the evidence which you have in hand at the time of preparing it. You will have to forecast sales growth, turnover of staff, possible sickness, inflation of price etc. When you are making the budget be sure that the forecast and assumptions are clearly spelled out and stated.
Work closely with your accountant
Think of your accountant as your personal business and financial adviser. You will see that this type of rapport with your accountant will bring numerous benefits. On the other hand your accountant will get a very good idea of your business, what drives revenues, what costs are involved and he or she will be able to give you a good review of performance of the company throughout the year. This way you as well as your accounts person will have a clear picture of any risks that need to be managed.
Let your Team know about the budget
You know, as a leader, that the success of business depends on your team. So it makes sense in taking out some time and discussing the budget and the major goals and assumptions you have made, with your team. If the team is aware of the financial forecasts, they will have a better idea of what they are aiming for and will align their work so that the results may be achieved.
Be responsible in tough situations
In situations of crisis or financial ups and downs, you will be in better position to handle things if you are in the know how from the start. You have been involved in setting the budget so instead of finding excuses you will focus your attention on getting results rather than playing the blame game.
Keep track of business performance
Have a system in place that measures your performance as compared to your budget. If the business is doing well, try to find means to boost this performance even more. If the performance is not good, try to focus on any changes which you may have to make. Focus on the big numbers that make up 90% of your budget ie: Income from business, Employees’ salaries and materials. Keep track of what impacts these numbers to keep your business finances right on track.
Being in touch with your business finances, in as close a manner as possible, gives you the upper hand in shaping the outcomes. If you know what is happening with your money, you will be in better position utilize it for greater benefits and save yourself from many a financial risk.