TIPS FOR EFFECTIVE FINANCIAL MANAGEMENT
In some organizations, managers fall into the trap of believing that financial management is something that the accounts team are full responsible for. While there will be areas like cash management, payroll, paying suppliers and collecting payments from customers that are likely to be handled by the accounts team, financial management falls into the remit of all managers and leaders. Managers often have concerns about this area, often believing that it is difficult and complex. The truth is that if you are an expert in your area of the business, you can excel in financial management. Here are some key tips.
BE ACTIVELY INVOLVED IN SETTING A BUDGET
Most businesses now devolve budget responsibility as much as they possibly can. As a result, managers have a chance to be actively involved in determining things like
- Sales volumes
- Temporary staffing cover for vacancies
- Staffing levels to deliver the sales
- Buying preferences in terms of products that will be used in delivering agreed volumes
- Investment in new equipment or facilities
Don’t miss out on your chance to determine your budget.
BE CLEAR ON YOUR ASSUMPTIONS
A budget is a plan for the future based on the best evidence you have at the time you prepare it. You will have to make assumptions about things like sales growth, staff turnover, sickness, price inflation, etc. Make sure that when presenting your budgets the assumptions are clearly stated.
WORK WITH YOUR ACCOUNTANT
Your accountant is essentially your personal business advisor. Use your accountant in this way and you will reap numerous benefits. Your accountant gets a better understanding of your area, drivers of revenues and costs, which will be enormously helpful with your performance throughout the year.
In addition, your accountant can model results for you and get a much clearer picture of the risks that might need to be managed.
SHARE THE BUDGET WITH YOUR TEAM
As a manager and leader, your success depends on the results of the budget, including the key assumptions on which it is based and your goals in terms of financial results.
When the going gets tough it is so easy to start to look elsewhere for assistance in setting a budget which you have up to.
MONITOR PERFORMANCE AND TAKE ACTION
Make sure that you have a process in place to carefully monitor your budget. If things are not going well see if there is more you can do to get back on track.
FOCUS ON THE MOST IMPORTANT NUMBERS
When it comes to financial management, managers can sometimes be clearer on what the two or three big numbers are that constitute about 90% of your budget.
In most businesses this will be:
- Income from sales or services
- Salary costs
- Major non-salary costs such as materials