Keys to managing finances in a company

Managing a company’s finances is one of the most important activities, since not only does the fulfillment of the commitments made by the company in the immediate term depend on it, but it also guarantees the sustainability of the business in the future. If you are a financial manager, you know what we are talking about, don’t you?

Well, despite the fact that this idea has a more or less wide acceptance level in the business field, there are many companies that still do not find the key to effectively and timely manage their finances.

Finance in a 21st century company, more difficult than before?

One of the questions that often arises among those who have not managed to find the key to managing the finances of a company is whether this task is more complex now than it was a few years ago. The answer, as in many other business management issues, is very crumbly and goes beyond a yes or no answer.

It is true that business models have changed substantially in recent years and that priority is now being given to elements such as the human factor, talent management, digitalization, process automation and management of the information flows circulating in the markets.

It is also true that, thanks to globalization and new technologies, these same markets have expanded and companies now have much more possibilities for expansion, interaction and internationalization than they did a couple of decades ago.

However, the management of finances in a company has not lost its essence. In other words, it is a task that continues to be concerned with getting the most out of both the cash flows and liquidity of the business, as well as the investments or operations that are planned in the medium or long term.

In other words, more than an increase in the difficulty of financial management, what exists at this time is a need to know more about the environment in which a business operates and to know how to interpret and select the information that best suits that task. There are more tools, although that does not mean they are more complex.

Some keys to managing finances in a company

Many management theorists and professionals have dedicated themselves to studying the keys that should be put in place for the effective and timely management of a company’s finances.

The financial management in a company has particularities, because it will never be the same, for example, to keep the accounts of a business with more than 30 years operating in a certain sector and with a fixed market share, than to do the same with another one that has just entered a local scenario and is looking for its positioning.

Even so, financial management has a set of practices and habits that can be applied to any type of company and in any type of market. These are what we call the first keys to good management:

Make use of financial tools that make your management task easier. New technologies today offer a wide range of options for calculations and analysis that can be useful for your business. Can you think of some?

ERP software is one of the best known, among other things for its work of integration and simplification of actions, as well as for cost reduction and productivity. You can also make use of a few applications, especially if you are a small business.

Be sure to check your financial statements. Some managers in this area tend to let their guard down when they have a favorable outlook. Don’t do this; even in good times, check your income level, cash flow, investment options, etc.

It avoids haste and improvisation when it comes to a financial outing with a bank. Any decision in this sense must go hand in hand with a previously conceived plan that ensures the viability of the operation and the fulfilment of the commitments made.

Make the collection and payment deadlines compatible, otherwise you will be faced with a scenario in which you will have to face numerous financial commitments. In other words, make sure that the assets of a given period are in line with the commitments of that same period.

It differentiates the profit box, two components of finance in a company that are often confused with regularity. Remember: profit is everything you earn during the course of your activity, while the cash box is the money you have on hand to meet your short-term commitments.

There are businesses that report many benefits, but at the same time their cash flow is minimal. If the two things coincide, great; if not, you should look for a formula to find liquidity.

Analyze the composition of the benefits, or what is the same, detail the nature and characteristics of what is bringing you profits in the long, medium or short term. What for? Simple: this way you can predict how sustainable this benefit is and if it is really being consistent with what you had foreseen in the initial investment plan.

Keep in mind that profitability does not equal margin. The first refers to the relationship between the profits from a given operation and the investment made; the second, on the other hand, refers to the difference between expenses and profits.

A business can have margin of action, but at the same time lack profitability and be financially unsustainable.

Finally, don’t forget that promptness in making your forecasts and calculations is a necessary condition for the success of a company’s finances. It will not help you to make the best estimates if they are out of date.