Financial health is very crucial for a company to be able to seek growth and make more assertive decisions, regardless of its size. Maintaining effective financial management is of great importance to make the company competitive and profitable.
Many aspects need to be taken into consideration when it comes to effectively managing a business’s finances, such as controlling expenses and properly organizing operations, among others.
However, some entrepreneurs and managers end up, because of lack of knowledge or time, only doing basic financial control, which does not help the company progress.
With this in mind, we have put together 7 signs that your company needs to improve its financial management and tips on how to resolve this situation. Keep reading!
1 – Difficulty in accessing the business’s financial data
Imagine how difficult it is to manage a business when financial data is obscure and complicated, and difficult to access. This is the first sign that your financial management needs more attention.
In this sense, always being aware of the business’s financial figures is very important for more efficient and planned decision-making. For example, it is essential for the manager to know how much resources are available for an investment or for an unexpected cost.
2 – Your business has difficulty complying with accounting requirements
Each tax regime has its peculiarity, and there are aspects that require respect and fulfillment by the company.
Hence, a business that finds difficulty in meeting all the requirements under the tax regime in which it operates will require improvement in the financial management with regard to detecting possible points of attention.
3 – Time consuming processes
The financial department of a business, like all others, reaps a great deal of its benefits when operations and procedures are automated, relieving it from the burden of human resources doing certain things.
A characteristic that shows that your financial control is not too good is if employees take more time than needed to perform monetary tasks that may be automated. Old and slow processes are major causes of low productivity and delays in a business.
4 – Accounts closing in the red
Having a company in the red is the clearest sign of low efficiency in your company’s financial management.
When operating expenses exceed the profits generated by the business, it is necessary to analyze all sectors in search of reducing these expenses.
This can be resolved by considering the expense and revenues of the whole company. That will let you know what costs to reduce and how you will generate more revenues to enhance your profit margins.
5 – Lack of ability in handling accounts payable and accounts receivable
Managing all bills due for payment and accounts due for receiving payments requires a proper accounting record, otherwise it becomes inefficient management of funds.
It is important to be aware of defaulting customers and to pay attention to payment dates. After all, not receiving expected amounts or paying interest to third parties due to non-payment can have a significant impact on the profit and financial health of a business.
6 – Investors and shareholders are not very confident about the business
A good indicator of a company’s financial health is the mood of its shareholders and investors, since the business’s performance has a very direct impact on them. Therefore, noticing their distrust is a sign that financial management needs to be improved.
To gain this trust, it is important to present the business’s management reports , with results and projections for new projects. This way, your business can project a good image and attract more investors .
However, it is necessary to keep control of finances up to date in order to deliver satisfactory reports, plan and execute advances in the company.
7 – Low profitability
Even without losses, maintaining very low profitability does not allow the company to invest in growth and expansion. This can be a problem caused by inefficient financial management.
It’s not always an easy task to find out why profit is not increasing, due to many reasons that can affect this.
All operations need to be kept under control, hence the role of financial management would be to allow the understanding of where the business needs to improve in order to increase profitability.
