Every company must have financial management to avoid its crisis. Financial management allows your managers to manage the finances of your company adequately and will be able to detect problems. They implement actions and strategies for their perseverance most fairly and efficiently. How To Avoid Financial Crisis In Your Company?
The financial manager “financial controller” is a crucial figure in the management of the company. In most cases, the success of the business depends on him. Every entrepreneur or entrepreneur must know how to reduce, manage and optimize their expenses through exhaustive financial control. If you have a company, you should know that cost control will allow you to reduce costs and guarantee the operation of your company. With a good strategy, you will be able to maximize your benefits, reduce imbalances and management costs.
Objectives of the financial management of the company
Establish a control system for the company’s finances and prepare, together with the company’s management, its general budget.
- Detect deviations that occur in it.
- Analyze the origin of the imbalances and provide the appropriate solutions.
- Communicate to the different managers of the company the detected problems and work together with them to solve the detected deviations.
- Phases of financial control
- Analysis of the situation and definition of objectives
Financial control allows knowing the case the company is in at all times. Thanks to this, the situation can be seen at the treasury level, profitability, cash flow, etc. Thanks to this phase, we can make reliable financial forecasts, allowing the company to define objectives in terms of investments, profitability and changes in production with a considerable reduction in uncertainty. How To Avoid Financial Crisis In Your Company?
To proceed with the financial control process of an organization, it is necessary to establish a series of parameters to define which points you want to control. The most important aspects that must be considered and that are key to the results are:
- Profit yield
- Position in the market
- Fiscal situation
- Status of assets, liabilities and equity
- Cash Flow
- Results of the company, in any of its meanings: exploitation, before taxes, net margin, etc.
Analysis of the imbalances in the company’s financial statements
The primary financial statements are the documents that must be created in the company when preparing the accounting year. They are essential if we want to know the results obtained by the organization over time.
The financial statements are made up of: the balance sheet, the income statement and the cash flow.
Balance sheet control
It is the report that reflects the financial situation of the company on a specific date. Although a company is always on the move, the balance is obtained on a fixed date. This informs the accounting principles such as the asset that is divided into surrounding and fixed; the long-term surrounding liabilities and capital.
Obtaining balance data will depend mainly on our need for information on this or that concept. In most cases, we will analyze based on ratios that relate to different patrimonial masses that are integrated into it. We can gradually configure new rates whose results will offer us a closer analysis of specific aspects: solvency, liquidity, indebtedness, net capital, etc.
Control of results
It is a document known as a profit and loss account, and it is used to understand what is the result of the company at all times, consequently, the income the company is earning and the expenses or costs.
This document serves to establish control over this state at a given moment, as well as to carry out forecasts and simulations on how a particular change of scenario or the implementation of improvement processes in the company can influence this state.
Cash flow control
In the case of a company, the engine it needs to run is nothing more or less than money. The presence or absence of cash or the necessary liquid media for the development of our activity determines most of the time, the obtaining of an optimal result.
There must be a balance between equity and external financing when balancing the ideal degree of leverage for the correct operation of the company.
Correction of imbalances
Once we have seen the structure that a control system must have and the tools that we must take into account. All we have to do is put them into operation and monitor it to be able to make the appropriate decisions in the event of variations in any imbalance. Being clear about the corrective measures by the financial manager is very important to detect deviations.
It is essential to determine the specific cause or causes of the problem so as not to take ineffective or erroneous corrective actions. For example, sales in your company may fall, and the problem may not be with the sales force, but rather with poor product quality. In this case, thanks to the financial manager who has control, he will know that the corrective measures should be directed to the production department rather than the sales department.
Financial planning is a tool for future projection or estimation of the company. To use this tool, you must define a future and make decisions based on that projection with the sole purpose of generating income. In this way, financial planning together with control processes projects the first development of the company.