The finance department is one of the most important ones in any business. This department is responsible for the management of all of the company’s finances, including the planning, organizing and reviewing the available financial resources. Any business owner will know that without funds a business simply cannot thrive. Therefore, it is crucial that you understand the cash flow and expenditures of your company so that it has a higher chance of stability and survival.
A good management of the finance department is even more important when you have a range of stakeholders and investors, as they will review the company’s situation and may also contribute to it financially. Understandably, you may have a lot on your plate trying to run an entire business, but there are things you can do to ensure this runs smoothly. This article will provide you with eight tips to effectively run the modern finance department.
1. Have a Clear Budget
Every business will have a range of expenses to pay, it can be difficult to manage all expenditures if you do not have a clear budget in place. Ideally, you should have a clear understanding of where your money is going and how much it is going to different places. A common mistake of struggling businesses is that they lose track of their expenses and if an emergency arises, they are unable to pay for it. These difficulties usually force business owners to borrow money or file for bankruptcy, in extreme cases. You can also seek the counsel of bankruptcy lawyers to find out if filing for bankruptcy would benefit you and if that’s the best possible move.
2. Keep Record of Your Daily Finances and Cashflow
This tip falls in nicely with the one just described above. However, we cannot stress enough the importance of keeping a good record of daily finances and cash flow to effectively manage your finance department. You should be aware of what your daily financial transactions are and keep a record of these, whether it is an invoice or receipt and make sure that all money is going to the right places. In addition to this, to run your finance department correctly, make sure to properly manage your bank accounts, late customer payments, stock coverage and supplier bill payments. Effective bookkeeping is the main approach to save you precious time and accounting costs when you complete timely reviews of the company’s financial targets.
3. Hire The Appropriate Experts
Managing the modern finance department can be difficult, particularly as you will have a diversity of responsibilities to oversee as a business owner. It may be a good idea to hire a professional that has a vast knowledge of finance and how to manage each aspect of this department. This will allow you to mainly focus on more pressing issues of your business.
4. Use Advanced Technology to Your Advantage
Technology has certainly improved the way we do many things in our daily lives. It has also simplified the way companies can be managed. Long gone are the days where all information had to be done by hand and keps in file cabinets. Nowadays, there is accounting software for small businesses that you can implement to make your life easier. Using such software will help you save time and money as you can input all of your data into the technological devices and it will keep it stored and organised for you. This will help you check your financial situation as well as identify any gaps or need for improvement.
5. Have a Good Billing Strategy
As you know, businesses cannot run if there is a lack of money coming in. You may find that there are some customers that pay late or payments always seem to go wrong. This can significantly affect your company, particularly during the early stages. Managing your finance department also means staying on top of cash flow to ensure that you have enough money for your business to survive. To manage difficult customers, you can charge a fee for late payments or offer a discount for early ones. It is all about developing a strategy that will ensure that you are being paid as and when you should.
6. Stay on Top of Your Tax Obligations
Every company will be expected to pay certain taxes. You should be aware of what you have to pay even before you build your company. These taxes may be paid yearly or quarterly, depending on where your business is registered and you will have to meet these deadlines. Failure to do so can lead to financial issues and heavy fines, which will negatively impact your business.
7. Review and Examine Your Funding Options
Depending on the size of your company you may have different cash requirement needs such as arrangement that covers the organisation’s overdrafts and personal funding; however, this will differ according to the nature of your company and your industry. You must review and examine your funding options as often as possible to assess whether this is what your business requires or if there are any changes you should be making.
8. Keep Good Credit
Although we often think carefully about personal credit score and the importance of maintaining this as positive as possible, it can be easy to forget about your company’s credit score. You may decide to acquire additional commercial real estate or insurance policies as your company develops, taking out loans may be the approach to help you achieve these purchases. However, this can be significantly more difficult if your business has poor score credit, thus making the management of your finances more challenging. Make it one of your priorities to pay off any debt you may have as soon as you can and only take out loans that are absolutely necessary and that you know you will be able to pay off quickly.
As a business owner, it is imperative that you implement a good strategy to manage every aspect of your business, including the finance department. Ensure to follow the tips provided above so that you run your finance department effectively, thus facing less risks of financial hardship.