Do you already understand what financial management functions are in a business? In running a business, money is the spearhead of the company. Therefore, wise money management is very important for the survival of the company. If money is not carefully regulated, income and expenses will be confused. For those of you who are running a business, make sure you have the right financial management.
Here are five financial management functions in business that you need to know.
What are the functions of financial management for your business?
Clarify Financial Plans
A financial plan is not only needed when you are going to start a business. Even in business development, a clear financial plan can guide you in spending money. Without a financial plan, spending will be less efficient. By compiling a financial plan, you can predict the amount of income and expenses over the next several periods. This will help you give an idea of what to do to get more profit.
Knowing the Amount of Debt
One of the company’s goals in conducting financial management is to find out how much wealth the company has and how much debt it bears. This will make it easier for you to make decisions to advance the company going forward, whether to seek loans or manage existing funds yourself to be used in business development. If you are able to manage finances well, you can make maximum use of these funds in various sectors to improve the production process.
Controlling Finances When Changes Occur
One of the main functions of fundamental financial management is controlling the company’s finances itself. For both small and medium-sized businesses and established companies, if spending is out of control it can lead to decreased profits and even bankruptcy. No matter how much income, if the expenditure is not controlled, it will be meaningless. For example, to get better quality raw materials, of course you have to spend much more. Or when the materials you normally use suddenly become unavailable, requiring you to buy a more expensive replacement. All these things, if done without financial management, might make expenses out of control.
Avoid Misuse of Funds
Maybe for small and medium-sized business people or for those who have just opened a business, financial audits or what we more often know as audits, are less necessary. But for large companies, an audit is certainly very necessary. With this one financial management function, you will know if there is the possibility of misappropriation of company funds by certain individuals, for example, operating costs that continue to swell without being balanced with an increase in performance. Of course, this makes the company’s performance less efficient. Therefore, financial management needs to be done.
One of the goals of financial management is to know the amount of profit we get and also what percentage of the average income we earn each month. This will help you save your budget. In doing business, saving part of the budget is one way to provide unexpected funds. The point is that if one day the company experiences a loss or less income while operational activities must continue to run, this savings fund can be used. In addition, saving funds can also be used as capital to develop the business to a further level.