This month’s topic is financial management. Now, don’t think to yourself, my accountant does that, and move on to the next cute video of puppies. Understanding the basics of financial management is the responsibility of the business owner as much as the finance team. Without a clear idea of what financial management involves, you are setting yourself up to be the victim of fraud, mismanagement, unnecessary tax and a whole host of SARS problems. So as they say, it is better to learn a little up front, than have to do a crash course in the midst of a crisis.
So what exactly are we talking about? Financial management involves planning, controlling and monitoring the financial resources of a company in order to achieve its objectives. Although the accountants just do it for fun, we shouldn’t only be keeping track of the cash to make it to month end, there should be some objectives in place:
– Do you want to be profitable by year 3
– Do you want to break even this month
– Do you want to save for that big capital item
– Do you want to open a new branch or launch a new product
What are you working towards as a company and what are the financial implications of that goal?
There are 4 main elements or foundation blocks to financial management:
· Planning – identifying what needs to be monitored, what amount you need and how you’re going to raise it
· Recordkeeping – keeping track of what comes in and what goes out in a logical, helpful format
· Reporting – monitoring how reality matches the plan, and deciding what needs to change
· Procedures and control – making sure nothing is missed and everything is checked
Over the next few weeks, we will discuss each one of these in detail. Don’t worry, you won’t need your accountant to interpret, we’ll use English to explain.