On a piece of paper there were different notions about the key financial management tools of the company.
Imagine a table with four legs. Each leg is important for the balance of the table, each carries its own meaning, its own load. On this table there are those treats that a person loves, wants to have and owns. Among them are money, family, and material components. Also important are feelings: love, fear, respect, self-confidence and others. That is, there is everything on the table that has an impact on the person.
So, financial management of the company is based on five components: budget, accounting, key business indicators and key objectives, impact, analysis.Training of any person begins with the basics. Learning the letters, then we start reading the letters by syllables, and then we move on to reading sentences and texts.
Now let’s take a closer look at the financial management tools in the company.
Budget. The budget is a structured document of the company, which describes its goals for the future period. Some companies allow themselves to live without a budget. Let’s consider whether it is possible to live without a budget and without planning. Roman philosopher Lucius Annei Seneca said: “When a man does not know what kind of pier he is on his way to, not a single wind will be passing by for him.
So in budgeting, if there are no financial goals in the company, then this business will go not where the owner’s wishes lead, but where the wind blows and it is easier to swim. If you can leave the company without the direction of development, without the direction vector, the matter is yours personally.
But then you do not need to be upset when a competitor easily bypasses you, or your profit will be far from the one you dreamed of. Read also: 5 solutions for companies in crisis Accounting. Every entrepreneur keeps accounting records, even if it is a small company with low profits.
Accounting has entered our lives and without paying taxes, the business will not be able to exist. Accounting is a system of collection, analysis and processing of company data in order to make effective management decisions.
Often, accounting will not answer the question of how profitable this or that project has worked, how profitable is my this, or other product / service. For these purposes, there is a management accounting, which in the tables and charts will reflect the profitability of your activities.
Key performance indicators, key targets. Any company should have a mission, i.e. the main goal for which this business exists. After defining this mission, it is necessary to build a chain of goals, short-term (up to one year) and long-term (five, ten years of development).
Short-term goals of the company will be the key objectives for the top management of the company, and they in turn will build goals for their employees. This is a brief overview of how to build goals in the business environment.
The same is true of the setting of key performance indicators. The indicators should be defined for each link in the company and, as a result, for the enterprise as a whole.
Impact. Influence is all that influences the employees in the company. It is their salary, their moral satisfaction, their contribution to business development, their mood and attitude to life.
As for the employee, the following formula of happiness is very fair: Happy employees = happy guests/clients. Happy customers = happy management = happy owner. You have to start with the employees.
If you are a general director, a top manager in a company, think about two directions of influence on your employees: tangible and intangible levers of influence. This is a huge field of creativity, and I am convinced that one company will have one motivator and another one will work for the other.
Analysis. In the analysis section you need to understand how your company actually worked, to make comparisons with the planned data. It is also important to compare the strengths, weaknesses, opportunities and threats of your competitors and your competitors (SWOT-analysis), analysis of pricing policy, market share, indicators.
In general, you can and should analyze any activity of your company. Read also: What is the main task of the head of any company Financial management in the company is based on 5 aspects: budget, accounting, key business indicators and key objectives, impact, analysis.
Removing it from the table loses its main purpose – to give pleasure, to influence a person, and if you miss one of the legs, you will have to throw it in the landfill, because it will be unsuitable for use.
So in business, if some component is not enough, then such a business may not be today, but a month later is doomed to failure. If you care about the company and cherish its success, then start building a successful financial management today.