financialtreat – will explain about The Importance of Financial Management in Companies and How to Do It You Should Know! which you will find in the following article. let’s look at this article carefully!
A company can be said to be developing well if the company has regular and good financial management. Especially in the current era of globalization, a company is required to have financial management that is in accordance with the applicable ethical code standards so that the company can compete tightly with other companies.
Financial management itself is an activity carried out by a company in obtaining funds as capital to work and allocating these funds effectively and managing assets owned by the company on a regular basis to achieve the goals of a company.
The Importance of Financial Management in Companies and How to Do It You Should Know!
Financial Management Functions in the Company
Financial management in a company has the following functions:
- Financial management functions as a financial manager where a plan for the entry and expenditure of funds is carried out within a certain period. Then, a detailed budget of incoming and outgoing funds is made so that the use of funds can run optimally.
- Financial management functions as a financial repository where funds in the company are collected and then stored safely.
- Financial management can function as a financial controller by evaluating or improving the financial condition system in a company.
- Financial management functions as a financial examiner, namely by conducting an internal audit of the company’s finances so that there is no misuse of funds within the company.
- Financial management serves as a place to provide information about finances in a company.
- Financial management is needed and is something that is important in every company regardless of the type of company. With financial management, a business run by a company can run optimally so that the company can get big profits.
If the company has poor financial management, the company will fail in running its business. So how important is financial management for the company? Let’s look at the following discussion.
Why is Financial Management Important for Companies?
- With maximum financial management, the company can find out which assets will generate income for the company when purchasing these assets.
- The amount of income generated from the purchase of assets must be balanced with the amount of income to be issued so that the company can make financial considerations for capital expenditures that will be made by the company.
- If capital expenditures are managed effectively then the company should not be forced to borrow large amounts of capital for assets that will not provide sufficient income for the company.
- Companies with good management will have good cash flow management so the company will always have enough cash to pay rent, insurance, telephone, employee salaries, and so on.
Companies can compare the due date on business receivables with the due date on outstanding receivables. Cash flow can be managed by shortening the time that has been set for customers to pay bills or can negotiate the due date with vendors.
Financial management is very influential on a company’s business, namely keeping costs low. Companies can ask vendors to lower prices, reduce electricity consumption, or buy supplies in large quantities so that they get discounts on these purchases.
If costs are not managed and monitored properly, companies will often increase selling prices to consumers in order to pay for price increases that continue to occur. Over time consumers can move to other companies that are much cheaper and the company can experience business failure.
Benefits of Managing Good Finances
There are many benefits that can be obtained when you can manage your finances well, including:
1. Stop Overspending
Most people who do not manage their finances well always spend excessive money every month. This excessive spending will have an impact on their expenses in the following month.
They need to reduce their expenses and pay off debts in the previous month. One way to avoid this is to apply budgeting to our income. Budgeting will limit expenses according to our income.
2. Helping Achieve Goals
Everyone has goals, both short term and long term. Some goals require money to achieve. Therefore, with good financial management you can easily achieve your goals.
3. Have Savings
When you can’t manage your finances well, you tend to spend your money on consumptive things. This is because there is no correct allocation of funds between needs and wants. A person who manages his finances well will have more savings than those who do not.
How to manage company finances
There are many ways you can do for company financial management. Following are some of these methods:
1. Keep Personal and Corporate Finances separate
The main mistake and often made by business actors is to assume that business finances and personal finances are the same so that they are made one. This assumption will make it difficult for you to distinguish between personal and company finances at the time of the audit.
Conditions like this will also eat away at your business cash slowly because unknowingly, company finances can be used for personal needs. An example of a way that can be done so that this does not happen is to create two different accounts. One is a special business account and the other is a personal account.
You can do this by creating a Jenius account. Where in the Jenius feature, there are Jenius Personal and Jenius for Business services. So, in 1 account, you can separate funds for personal needs and funds for business needs more easily.
2. Make Financial Bookkeeping
In the management of a company can not be done carelessly, especially just relying on memory alone. So that the company’s finances can be neatly organized, you should do documentation by making a Cash In Book (BKM), Cash Out Book (BKK), recording sales and costs, recording inventory and fixed assets and recording accounts payable balances.
In addition, every day you have to physically match the money balance with the records that have been made. This method is done with the aim of controlling money transactions and also ensuring that no money is tucked away.
To make it easier for you to record, you can use the help of financial report recording technology on a computer such as Microsoft Excel so that financial reports can be neat, detailed, and easy to make.
3. Determine the Financial Portion
The financial portion referred to here is like the distribution of total income into several posts. For example, immediately separate the post for paying debts, paying employee salaries, operating costs and so on.
The first thing to do is to determine how many portions will be used in various company needs. Determination of the financial portion must be agreed in advance so that it can run in a structured manner. With these financial portions, the company’s finances can become more organized. Because, indeed there is already a portion of each for every need.
4. Minimizing Accounts Payable
The next way to manage the company’s finances is to minimize business debt. Even though the business you have has just been started, as much as possible do not use capital that comes from debt. Moreover, you do not know the certainty of what the future business prospects will be.
There are many things to consider if you want to start a business with debt. For example, is it true that the debt that is made can indeed increase business progress and does it have good prospects in the future? If not, then you should reconsider before going into debt.
5. Routinely Make a Budget
Budget or budgeting is useful as a limitation in assessing business efficiency and performance. Routinely making a budget will limit spending in accordance with what has been determined and estimated in advance. After all the budgets in one period have been prepared, the next step is to carry out budgeting on an ongoing basis.
Read more financial management:
6. Developing Business with Profit
The next way of financial management in the company is to develop a business with a profit. If your company gets a lot of benefits, don’t be satisfied immediately.
Use these advantages to develop your business so that it can grow even more. For example, adding products sold or adding a fleet for operations. That way, company profits can be effectively used for business development.
That’s a little explanation of how important the company’s financial management. And after summing it up, it really is very important. I hope this information is helpful.
1 thought on “The Importance of Financial Management in Companies and How to Do It You Should Know!”