Managing Company Finances for smart business owners

Updated on 14 April 2014

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How smart business owners manage their company finances


Entrepreneurs by nature are often brilliant visionaries who have the drive and resourcefulness to make business ideas a reality. However, with many small to medium businesses, there is often a gap with many business owners not equipped with the necessary financial capabilities or training required to effectively manage the financial aspect of a business.

Because of this, understanding your business’ financials for tax compliance and auditing purposes can seem daunting. Many SMEs are unable to interpret financial reports and data, which are crucial if you want to know if they are profitable as well as any potential risk areas in terms of over-expenditure. Implementing a financial reporting solution will also help you be compliant with small business regulations, and ultimately enable you the business owner, to make sound business decisions to support continuous profit and expansion.

As SMEs expand into new markets in search of growth, one of the challenges for business owners/entrepreneurs is, understanding the financial frameworks and drivers behind that growth. Any small business in a competitive market needs to understand these frameworks and have the necessary tools to help with monitoring the financial and profit process.

“Implementing a financial reporting solution will also help you be compliant with small business regulations

Although many businesses can benefit from having a great accounting firm on board that can guide you along the way, this does not mean that as a business owner, you won’t need to be able to review and manage your financials regularly.

To focus on driving business strategy, you require financial solutions which provide full real-time analysis and forecasts on financials that can be integrated with any accounting system and can produce a complete management pack in a matter of minutes.

What your comprehensive financial solution should include: 

1. A monthly management report pack This includes an income statement, balance sheet and cash flow statement compared against the budget for the month, quarter and year as well as the prior year is ideal. This is important if you want a real view of how your business is growing – and make strategic decisions based on accurate data

2. A 12-month trend analysis reports This will not only give you a holistic view of your profit and loss over a period, but will give you additional insight into sales or expense trends and how these trends are affecting your profit. This will allow you to plan better for the coming year.

3. A cash flow forecast We all know cash is king, so a cash flow forecast is key to managing and planning for this essential aspect.

4. Financial ratios 

A solution that includes financial ratios is a bonus as it measures a company’s liquidity, leverage and profitability and will go a long way in providing you with an idea of how your company is performing.

Implementing a financial reporting solution not only assists with management, it can also help businesses to identify inaccuracies and eliminate risks – ensuring that any inconsistencies can be identified, correlated and presented as one overarching financial outline.

See Also: Financial Planning for Success in the New Year

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