What comes to your mind when you hear the term financial management? For an individual, it includes paying your house mortgage, rent, managing your bank account, paying utility bills, and taxes, or at times borrowing money from family, friends, and relatives when your monthly expenses exceed your income. However, financial management for businesses involves a more dynamic and rigorous approach as the requirements become increasingly challenging and complex. Today, we are diving into the world of Financial Management Services, so grab a coffee and join us in exploring this insightful article.
Financial Management involves planning, organizing, directing and controlling flow of money in and out of the business. It is the strategic planning and management of financial resources to better align with business goals and objectives. Better planning and management aim to maximize shareholders' value, manage liquidity, mitigate risk, make informed investment decisions, and safeguard financial health through both short-term and long-term planning.
Financial Management Services are at the core of any strategic financial planning and decision-making supported by finance teams. The objective of these financial management services is to keep the management constantly informed and help navigate challenges by making well-informed decisions based on real-time data. For instance, finance teams often use business intelligence tools such as Power BI, Tableau, Zoho Analytics, and similar tools to provide meaningful insights to management through visual and graphical representations of the financial performance of the business.
There are four main objectives of financial management services;
Every business raises capital to fund its activities such as operations, investments, and acquisitions. However, maintaining an optimal level of debt and equity is critical to maximizing value for all shareholders. This is often measured with solvency ratios, such as debt-to-equity ratio. Financial management services act as a guiding force by providing a solid foundation for the business’s capital structure.
Better resource planning aims to ensure that the business remains solvent to fund its day-to-day operational needs, pay employees, pay taxes, settle bills with vendors and suppliers, and manage credit terms for customers. Financial management services help identify products or services that are more profitable and bring greater value to the business.
Every year has its unique challenges for businesses, therefore better planning and monitoring help steer the company in the right direction. This includes establishing yearly, quarterly and monthly financial goals to identify shortcomings well in advance. Whether you are planning to invest in new business verticals or want to explore in technological advancements, a strategic budget and forecast are essential.
The ever-changing regulatory environment makes businesses more susceptible to non-compliance of global standards (IFRS, GAAP) and/or local regulations (IRS ). With an increasing consumer focus on sustainable reporting, it is inevitable for companies to clearly outline and comply with ESG goals while effectively communicating with all stakeholders. Financial management services play a pivotal role in bringing transparency and accountability.
Financial Management services include;
Ever heard of ‘Cash is King? But what if your cash flow resembles water trickling from a closed tap, taking a lifetime to fill up your bucket? Financial Management services serve as a protective barrier to weather the upcoming storm, keeping your business thriving even in times of uncertainties and external shocks.
In a growing economy with low interest rates, the company may borrow money from banks or venture capitalists to expand into new geographies and business verticals. However, during a recession with a sluggish economy and high-interest rates, there may be possible layoffs or closure of unprofitable business verticals or locations to maximize profitability. Financial management services set the foundation for any business to steer or navigate by directing resources in the right direction. These services are critical for businesses to ensure that the company does not go bankrupt and can manage its cash requirements. Better planning and monitoring of financial resources play a key role in helping the business grow and thrive.
Financial Management services focus on keeping the company liquid and maximizing profitability. Finance teams play a pivotal role in checking and monitoring financial resources through the utilization of various tools for reporting insights to the management to make well-informed decisions.
Imagine the payroll due date is near, and the two major clients have delayed payments by a month. Under these circumstances, the business will not be able to compensate employees, potentially harming the business. However, this could have been avoided through better financial management, where the business could have been able to secure the funds through alternative means such as an Overdraft Facility provided by the bank.
Why do many startups, small and medium businesses (SMBs) fail? As you may have heard, most businesses run out of cash and struggle to meet their financial requirements. There can be several reasons for running out of cash; however, one of the primary causes is poor financial management.
Business owners, operating with limited capital, often choose to employ individuals with less experience or qualifications or handle financial management themselves. For instance, employing an expert may have an average annual salary of USD 80,000, and making business owners think twice before opting for such an expensive resource.
Instead of employing in-house financial experts, businesses can outsource Financial Management services to well-experienced, qualified and industry-vetted professionals. Financial Management services are provided by outsourcing firms with appropriately qualified and experienced staff. Outsourcing financial management services to these professionals can bring significant value to startups and SMBs at a more affordable cost.
Consider outsourcing your financial management services to enhance your financial success. What could be better than having an expert provide you with freedom from worrying about your financial uncertainties? Due to dynamic market conditions, the role of financial management experts has become increasingly vital. It is time for businesses to invest in key roles and appreciate the benefits they gain from employing financial management experts.
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