5 Financial management mistakes you should avoid
Financial management is an important administrative tool for the growth and success of any business. However, regardless of the size, segment and time in which the company operates, there are still many entrepreneurs who make management mistakes involving finances.
The lack of working capital, lack of control in the cash flow, debts and late taxes are some of the problems that end up seriously compromising the corporate financial control, even leading to bankruptcy.
For you to know and avoid the most common mistakes of financial management, we list 5 of them below 5 and some good practices for you to adopt in your business.
- Not investing in an expense management system
To ensure the financial security of your company, it is necessary to know every detail of the operations and processes that involve your business. Every piece of information is important: control of cash flow, volume of products in stock, costs with partners’ and employees’ salaries.
Knowing this data allows you to reduce mistakes and glimpse opportunities, thus adjusting the course of the company. Therefore, invest in automated management systems that gather all information and facilitate the administration of your small, medium or large company.
Some estimates suggest around 80% of manually generated Excel sheets contain mistakes or gaps in information. On average, a company reduces processing time and costs up to 75% when using automated expense management solutions.
Everest, for example, offers an innovative payment and cash management flow platform for businesses that addresses clients ranging from small businesses & startups to established growing enterprises, making their daily banking operations easier.
With Everest it is possible to invite accountants to the platform and give them access to financial data in one click. This means the account can have direct access to the account in viewer mode for the collection of transaction exports or bank statements.
Do you want to have the best technological solutions in your business? Contact us here and ask for your personalised demo.
2. Mixing company and personal finances
Unfortunately, this is one of the most common financial management mistakes many companies make, and it can be a big loss in the long run. In the retail sector, where the flow of buying and selling can suddenly increase, the damage can be even greater.
The fact is that, in the excitement of an apparent success of the business or in the great desire to help the company, many partners end up mixing personal capital with the finances of the institution.
A good example is when the entrepreneur decides to pay personal bills with the company’s money and does not pass on the information to the financial sector. Or even when there is an extra injection of money for the development of some project.
To avoid this scenario, it is important to have a consensus among the partners about the separation of the company’s assets with each one’s financial capital. Corporate cards may be created to facilitate control.
Furthermore, one must always work within the company’s reality, avoiding that projects are created randomly and using external financial contributions.
3. Not elaborating on a financial plan
How can we celebrate the success of the business without knowing whether the results are satisfactory or not? In other words, even if the indicators point to good momentary numbers, without financial planning it is practically impossible to know where the company can or should arrive.
The financial planning should include projections based on data from past and current months, and with which the short, medium and long term goals are defined. Only this way the company will know what its possibilities in cash for new investments are, or if it is necessary to pause certain projects.
4. Not controlling the cash flow
Cash flow is one of the most important tools in financial management. Through it, the entrepreneur gets a vision of the present and the future of the company to assess the availability of cash and the company’s liquidity.
Therefore, it is of utmost importance to register cash inflows and outflows, in addition to projecting future payments and receipts.
With this data in hand, it is possible to anticipate some important decisions, such as the moment to reduce expenses without compromising profit, plan investments, organize inventory control, in addition to developing strategies to minimize or even avoid financial difficulties.
5. Lack of analysis and follow-up of the company’s performance
It is not enough to keep track of cash flow, considering only the difference between income and expenses. It is also necessary to monitor the volume of products and cost of stock, the amount of salary received by partners and employees, the number of sales, among many other things.
The analysis of these factors is only possible if all operations are recorded in a management system that gathers all information and enables the preparation of periodic reports. Thus, it is possible to make comparisons for more assertive decision-making about the company’s performance.
Share on Facebook
Share on LinkedIn
Twitter
Share by email
