The data is troubling. According to a variety of studies, 6 out of every 10 companies go under before they complete five years of operation. The reason, according to the analysis of many institutions, is a lack of financial planning on the part of management.
Financial management is something that should be taken seriously. To give you an idea, efforts made in this area can not only avoid the premature shutting down of a business, they can also guarantee the company’s productivity over the long term.
Still not convinced? Then keep reading this post and find out the main reasons why you should begin to focus on the financial management of your business right now!
Invest in the Sustainability of Your Company
It’s no secret that the unpredictability of revenues and expenses can easily lead to debts. What happens is that when a manager adopts reactive management , by just putting out fires when they appear, debts begin to accumulate because there’s been no planning of cashflow and stock needs.
The constant monitoring of cashflows and maintaining your cashflow, which are common practices in efficient financial management, can help you diminish unpredictability and help you create the basis for your company’s long term sustainability.
Improve Decision Making
Should you make an investment? Should you take out a loan? Look for a partner? Look for investors? These are recurring questions for any company, however, if your manager doesn’t know the financial reality of your business, the wrong decisions will be made — which can lead to your company becoming part of that negative statistic that we mentioned above.
When you control your expenses and know exactly what your revenues are, the manager can make a conscious decision based on information and not intuition, which can often be wrong.
Improve Your Tax Management
A company’s tax burden is never a friendly topic, because besides paying them, bureaucratic work has to be done to pay them. If a manager doesn’t administer a company’s finances properly, these problems can become even worse.
What happens is that without good tax management, you end up paying more tax than you should, and as a consequence, pay fines for making incorrect calculations of the taxes you need to pay. These are senseless losses for your business which could use this money to reinvest in the company’s growth.
Guarantee Your Business’s Success
It’s clear that all of the benefits mentioned above will lead your company to this path. With good financial management, it’s possible to guide your business down a healthy path, keeping it far away from unnecessary debts and tax problems. This is the secret to your company’s sustainability, which will put it among the companies that are on the road to success.
Therefore, if you’re planning on your company becoming a reference in its area of operation, you should start your financial planning right now!
Now are you convinced that financial management is fundamental to your business’s success? Then check out this post which offers 7 essential financial management books!