Have A Good Financial Management System

Having a well-organized bookkeeping system is vital, however it is more critical to establish your methods for financial management and control.

What is the “financial management” mean exactly? It is the process a CPA firm in Scottsdale can use to put your numbers to work to make your business more successful. With a good financial management system, you will know how your business is doing financially and why.  It can be used to make decisions to improve the operation of your business.

Why is financial management important? Because a good financial management system enables you to accomplish important big picture and daily financial objectives. A good financial management system helps you become a better manager by enabling you to:

1. Manage proactively rather than reactively.
2. Borrow money more easily; not only can you plan ahead for financing needs, but sharing your budget with your banker will help in the loan approval process.
3. Provide financial planning information for investors.
4. Make your operation more profitable and efficient.
5. Access a great decision-making tool for key financial considerations.

Financial planning and control will also help you become a better micromanager by enabling you to:

1. Avoid investing too much money in fixed assets.
2. Maintain short-term working capital needs to support accounts receivable and inventory more efficiently.
3. Set sales goals; you need to be growth-oriented, not just an “order taker.”
4. Improve gross profit margin by pricing your services more effectively or by reducing supplier prices, direct labor, etc., that affect cost of goods sold.
5. Operate your business more efficiently by keeping selling and general and administrative expenses down more effectively.
6. Perform tax planning.
7. Plan ahead for employee benefits.
8. Perform sensitivity analysis with the different financial variables involved.

The first thing you need to do, is to develop a financial management system which is the creation of financial statements. To manage proactively, you should plan to generate financial statements on a monthly basis. Your financial statements should include an income statement, a balance sheet and a cash flow statement.  There are software packages out there to help you create monthly financial statements.

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