Financial Management Basics for SMBs

All businesses, regardless of their size and niche, dedicate most of their efforts to money management. This is especially important for small- and medium-sized businesses that depend on cash flow to keep their operations going. For them, a well-organized financial management means being able to keep the doors open and the employees paid.
This makes business owners and managers play a lot of different roles within a company because financial management is connected to all the aspects of production, labor, promotion and sales.

Planning

The first job of a good manager is to plan how to allocate the company resources the best way possible. This is done by defining goals and values of the business and determining the strengths and skills that the company has at its disposal.
The difference between planning and daydreaming is in the realism with which the goals are approached. They must be obtainable and there should be a clear timeline detailing every step of the way. A great financial manager always has the big picture in mind while juggling the details. Check how much does a financial advisor make and you will have more information about importance and responsibility of this job.

Controlling

In order to make sure that the plan is being put into place, managers need to control the quality of work of everyone within the company. This means figuring out how to use the most important resource a company has – its employees.
Managers should also control the quality of the products and how it could be improved in the most cost-effective way, since most of the company problems are usually solved either by spending more money or by imposing better rules.

Managing risks

Every move a business makes comes with certain risks. There are operational risks regarding day-to-day running of a business (for instance, hiring someone is always a risk because they might prove to be unworthy of your time and money) and there are strategic risks that are a part of steering your business in a certain direction.

A job of a financial manager is to manage this risk by creating alternatives and preparing contingency plans in case something goes wrong. This part of the job requires a lot of foresight and it could actually save the business when times are tough.

Analyzing cash flow

It’s an old truism that cash flow is more important than profit. Cash flow is what makes the business thick and it’s used to cover day-to-day expenses. That’s why financial managers need to familiarize themselves with your cash flow, which will help them understand the challenges and peaks of your business.
Most businesses have good and bad seasons depending on their niche and products they are offering. By being able to predict the good seasons, finance managers are able to prepare for the bad ones.

Dealing with problems

Every now and then, your company is bound to experience some financial problems and financial managers are going to have to find the appropriate solutions for them. There are two main components to this. The first is to find a way to fix the problems right away, by tapping into some additional income or by using some of the savings.
The other, more important one, is to determine whether there are some systemic issues that are causing the problems and figure out what is the long-term solution to those problems. That’s why financial managers need to understand the business in its entirety.

Separating personal and corporate finance

It often happens that business owners use their personal assets to help their businesses out, especially if their business has hit a rough patch or is still in its infancy. This is sometimes a necessary thing to do, but it isn’t really wise because it puts their personal property at risk.

By creating a firewall between the company assets and those of the owners, the owners are making sure that they are protected in case of bankruptcy or a damaging lawsuit against the company.
What are the skills of a good financial manager?

Managing small business finance is the most important part of running a small business and it should be designated to a person that can be trusted, that understands business from a lot of different perspectives and tries to look at the bigger picture every once in a while.
These are all the qualities and skills some people exceed at, but also the skills that could be taught and that people can learn. That means that the best way to go is to give the job to someone who’s trained in business and finance, but has also worked in the industry from the ground up.

Financial management is about setting goals for your business and finding ways to obtain them. It’s all about making detailed plans and seeing how they are executed in the most lucrative manner.