Every entrepreneur aims to achieve success in business. As everyone knows, money is vital in any type of enterprise, therefore, knowing how to invest, save and profit is essential to ensure the company’s financial health.
Given such a fierce market, keeping finances up to date is of paramount importance to stand up to competitors. For this to be possible, it is necessary to analyze, evaluate, monitor and control all operations, from the input to the output of resources.
Aiming at answering all your questions about how to apply these didactics in your enterprise, in this post we have six essential tips to maintain the financial health of your company. Read carefully and check it out!
What is financial health?
In a nutshell, financial health means – honoring commitments to third parties, paying for expenses and costs arising from business activities, guaranteeing working capital to optimize potential investments and still obtain profits at the end of operations.
In order to know how your business’s financial health is, it is essential to analyze the real situation of the company. Work with actual values and financial accounting indicators that demonstrate how the money is being applied and which bottlenecks are spending the most.
It is useless to work with imaginary amounts, without certainty of how and where such data came from, as this may even lead to the bankruptcy of a company in the long term. By using safe indicators and reliable information, it is possible to outline strategic actions that enhance the decision-making.
How to maintain financial health in business?
Ensuring the financial health of a company is not an easy task and does not happen overnight. For businesses to be able to face competition and go through periods of crisis, it is necessary to follow some routines that will ensure greater control of finances. Check out the main ones.
1. Cost management
Cost is inevitable for the development of any activity; therefore, it is the main factor that influences the formation of the sale price and the financial management of the entire company.
An efficient cost management guarantees better results, as it allows establishing a profit margin that is in line with the entrepreneur’s desire and the company’s needs and provides data on the performance of activities, thus making it possible to maintain or change the practices carried out at certain times.
By performing routines such as this one, the benefits are immediate, as you will be able to reduce the risks of the business, pricing the products correctly and, consequently, increasing the company’s profitability.
2. Management of accounts payable and receivable
Organization is the key to success in financial sectors; given this, two main pillars of this sector emerge: accounts payable and accounts receivable.
In this sense, it is essential to pay attention to payment terms so that all obligations are paid on the due date, as this prevents the company from being subject to fines and interests. In addition, meeting the deadlines of accounts payable makes the relationship with suppliers easy to negotiate.
As for accounts receivable, the premise is the same: controlling the receipt dates, as well as provisioning potential defaults by customers with this sector, are crucial to not jeopardize the financial health.
Thus, if any customer does not honor payments, your company will be prepared for this unforeseen event. In addition, with the actual data on how much the company is yet to receive, the planning of future investments is made more safely. This management is done by using cash flow.
3. Cash flow control
This tool is the right hand of managers, as it contains management information on the day-to-day of the company. When done correctly, the cash flow demonstrates all the inputs and outputs of the enterprise, allowing a future view of the finances.
Cash flow is decisive for the business’s financial output, as it can be projected on a biweekly, monthly, quarterly or half-yearly basis. The period should be analyzed according to the individual needs of each enterprise.
As a result, by checking the flow, the manager will know how much they will have to pay in the next periods.
However, it is worth remembering that for this tool to bring positive results, it is essential that all inputs and outputs are recorded in it, regardless of their amount.
4. Inventory control
How many times have you heard the phrase: “idle inventory is idle money”? Understanding indicators such as inventory turnover is essential to know how long the merchandise is at a standstill in your company.
Another factor that needs attention is the minimum stock and the maximum stock; all these metrics are part of inventory control. When well prepared, they guarantee a turnover of inputs and goods, consequently contributing to the financial health of businesses.
5. Use technology to your advantage
Cost management software is essential when your company is investing in financial health, as it allows you to view on the computer screen all transactions, inputs and outputs, as well as reports with information that help in the decision-making.
In addition, the technology has a direct impact on planning, integrating all sectors in the same system – in other words, communication becomes streamlined, objective and transparent.
Another advantage of the IT solution is that compliance with tax deadlines is always maintained, avoiding delays that could result in fines. That way, management becomes more professional, improving results.
Thus, employees have a systemic view and are able to act before certain errors occur. It is a way to gain competitiveness.
6. Conduct audits
The company’s financial health requires constant audits, as they carry out an in-depth assessment that ensures the fidelity of records and processes.
With the software, it is possible to present accurate reports with information that will help in the audits, which are essential to avoid deviations or errors in management.
Audits are also important because they are useful to keep a healthy track of the accounts, without potential surprises that could negatively influence the budget.
Check out the benefits of investing in the company’s financial health
Considered as the brain of a business, the financial sector must always be valued in order to help with management. After all, the company’s financial health can become ill, causing incalculable damage. With market fluctuations, those who make a lot of mistakes have serious risks of going bankrupt.
It is an investment with a guaranteed return and many benefits, such as:
Managers who act to maintain the company’s financial health are able to keep up-to-date with payments due – in other words, cost reduction is a reality.
In addition, by installing management software, a lot of money is saved, from a reduction in prints to a more accurate inventory control.
As a result, it is possible to do more with less, a fundamental factor in the current economic scenario.
With integrated employees and having a systemic view of everything that happens in the company through the software, production inevitably increases.
After all, each person is focused on their duties, segmenting the activities. For this reason, technology is extremely useful throughout the process, especially in the financial sector.
The bureaucracy also decreases, leading to results being achieved in a shorter period of time.
By keeping finances in order, investments happen as much as the actions that keep things going.
Thus, time optimization becomes a reality within the company, mainly to complete all routines.
What mistakes to avoid in order not to jeoperdize your company’s financial health?
Knowing what should be done to maintain the financial health is not enough; there are vital mistakes that need to be avoided so that jointly the management actions achieve the desired results.
The main and most common mistake in enterprises is to mix personal expenses and business expenses. This can inflate the costs and jeopardize the finances considerably. The entrepreneur must know how to reconcile personal and professional attitudes, that is, it is necessary to maintain a remuneration that is compatible with the lifestyle, avoiding withdrawals that could compromise the budget.
Another factor that cannot be overlooked is disregarding the accounting information for decision-making. This knowledge is a rich source of financial and managerial data and indicators that guide safer and more positive decisions. Those who explore the data get more success in the actions.
As you can see, financial health is vital to ensure the continuity of business activities. Thus, when these routines are applied in a conscious way, success is near.
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