The development of a business can be seen from the health or financial management in it. In an era of increasingly fierce business competition, companies are now not only required to satisfy customers’ hearts. Moreover, optimal financial management will make the company survive among the many competitors that continue to emerge. The existence of financial management is an important thing in business. Whatever the field of business activity, good financial management will make it easier for companies to get profits. Financial management activities are generally associated with managing financial functions to achieve business goals. Starting from the planning, budgeting, allocation, control, reporting, and depositing of funds owned by the company. In this article, we will discuss the importance of financial management for businesses.
3 Main Activities of Financial Management
Understanding financial management can be explained through three activities related to funding, including:
Fundraising activities, which include how companies get funding to support their business activities. Sources of funds can be obtained through internal and external such as investors or bank loans.
Fund use activities, namely investment fund activities on various company assets.
Fund management activities, namely the form of allocating and managing existing funds as efficiently as possible after the funds are obtained.
Both in small and large companies, the function of financial management is very important so that no irregularities occur so as to disrupt business lines. Good financial management is in accordance with applicable accounting standards so that you could say quite complicated, but that is indeed the task of a financial manager.
Business Reasons for Using Financial Management Applications
Because financial management has a large role in the sustainability of a business, then its management must also not be arbitrary. Well-Managed financial management will produce data and information needed by the company related to assets, cash flow, to employee welfare.
Every business owner must really pay attention to the company’s financial management so that financial problems do not occur in the future. The following are the reasons why financial management is very important for your business:
Calculate Company Capital and Assets
With financial management, companies can find out the assets owned and assets needed. When the company will buy an asset, make sure that the asset can make a profit. Do not let go of debt or increase capital to buy assets that actually do not produce significant income. From here the company can make predictions of its balance.
With financial management applications such as Journal accounting software, you can control company assets, both fixed and intangible assets. With proper asset management, you can also properly control the value of assets that can be used to make business planning more mature.
Manage Cash Flow Well
Financial management can help you to generate good cash flow. With good cash flow, the company can pay operating expenses smoothly. Included in daily operational costs are building rent, utility costs, and paying employees every month. You can ensure that the company has enough cash to pay all of its obligations every month. The financial management application also makes it easier for you to manage cash flow. You can see the exact figures on your business expenses and income quickly to ensure your business cash flow is in good condition.
Reducing Operational Costs
When the company has good financial management, all operating costs can be reduced. Everything can be seen from the notes to the financial statements that have been made. If the cost of utilities is already high, the company can save electricity. You can also improve employee efficiency if it is felt that the company already has too many employees. Or you can also negotiate with vendors to provide price discounts. These things can be done to reduce the company’s operational costs.
Plan and calculate taxes
One example of a good company is paying taxes on time. Tax planning needs to be made to provide an estimate of the amount and timing of tax payments. By paying taxes on time, companies can minimize the occurrence of late payments so that they are not subject to penalty fees. In addition, your company can also allocate funds for further tax bills.