Every business needs money for daily operations and to meet essential expenses and payments. Financial management in any business includes: financial planning, control, and decision making. Planning is more about acquisition of adequate funds to maintain the operations of a business and making sure that funds are available when needed. Control means, one has to ensure that assets are being used efficiently. Decision making determines how to acquire funds and where to acquire funds from, and how those funds should be used and these decisions are made within the context of the risk assessment of the available options.
The Importance of Financial Control
Financial controls are a critical part of any organisation. For many managers, exercising financial control is a mystery. Controlling finances ensures that the resources are being correctly and effectively used. As a business owner, one should put financial control as priority, to be be able to track performance and evaluate progress towards the financial goals of the company.
Financial control system shouldn’t just be about compliance. It should be focused on improving the key aspects of the financial operations. If the business owner loses control of business finances, it becomes difficult to come out of such a situation. It is absolutely essential for even the smallest organisation to have the basic financial controls in place. True business leaders are always great financial controllers.
Essential For A Growing Business
When the business grows, the business owner needs to keep a regular track of the state of business finances. He should ensure that growth does not come at the cost of financial and organisational stability. If the business is growing and the cash flow is not steady, the business may lose out heavily in the long run.
An Eye For Detail
Without financial control, a business leader would be like a person in the dark, without any knowledge of a goal or a destination. Financial control helps him figure out long term goals and work his way towards it. He should know about the finances of every department in the organisation. Periodic analysis of the state of business finances, helps in focusing on and resolving the problem areas. Online tools like Invoicera help in generating the appropriate reports for analysing business finances better.
Pay Invoices On Time
Late payments can be symptomatic of poor relationships between a business owner and the suppliers. A leader supplier payments are done in a timely manner. This is very important for maintaining a good market reputation of the business.
Timely Disbursal of Salaries
Requisite financial controls, help in timely disbursal of salaries. Transparency of the compensation system and a clear commitment to equity by the organisation are also critical. With financial control, one can fulfill all these needs and gain the trust and productivity of employees.
Business analysts report that poor management is the main reason for business failure. Poor financial management is probably the most frequent stumbling block for entrepreneurs. Understanding basic issues related to cash flow can help to plan for unforeseen eventualities that nearly every business faces. It is impossible to achieve long-term and short-term goals without effectively managing business finances. A leader needs funds for business growth, market competition, and to keep his business operational and maintain his customer base. All these goals can only be achieved by accurate financial control mechanisms.
About the author:
Veronika Tondon is business enthusiast. She writes about emerging technologies and opportunities for business. She is working as a Marketing Manager with Invoicera, a leading cloud invoicing solution.