Making mistakes in a company’s financial management is more common than you might imagine. Many businesspeople can be excellent in the market they operate in, but can go bankrupt because they do not pay the necessary attention to the financial sector of the business.
It is also common for people to not have a real understanding of what financial management is. According to Dow, financial management comprises all administrative actions and procedures, which aim to maximize a company’s financial and economic results. Therefore, it is more than essential that management is taken extremely seriously!
So that you know the most common mistakes made by companies in the financial area, and how to avoid them, we have prepared an article for you! Check it out right now!
1. Not monitoring the company’s performance
Not monitoring indicators such as profitability, revenue, working capital, among others, are among the main mistakes that financial management can make. They are the ones that indicate whether the company is making a profit or a loss , and they are indicators that allow better decisions to be made before problems increase.
To analyze such indicators, it is essential to have data records and have reports that are clear and objective, making them easier to read and understand by the manager, and that can be compared over time to find out how the company is performing.
2. Not having a financial plan
It may seem strange, but it is more common than you think that there are still companies that do not have financial planning . And this is another big management error that leads many businesses to bankruptcy.
Financial planning must include projections based on data from past and current months, and with which short, medium and long-term goals are defined. Only in this way will the company know its cash possibilities for new investments, or whether it is necessary to pause certain projects.
3. Not controlling operations
Not having control over the buying and selling operations carried out by the company is another very common error in business financial management. Without such data, it is impossible to plan, know how cash is moving, or even know whether the company is making a profit or a loss.
The ideal is to have a financial management system where all operations, including those made via credit card, debit card, bank slip, among others, are recorded and already organized.
4. Not controlling cash flow
Having effective cash flow control is among a company’s main financial tools. It is through it that the manager can have a view of the financial health of his business, make decisions and make projections.
Therefore, it is recommended that all the company’s financial transactions be recorded, both incoming and outgoing, avoiding any errors in cash flow, and allowing all data to always be up to date.
5. Not having stock control
Having excess inventory can mean that the company’s money is sitting idle. And the opposite can make your company lose sales or close new business. In both cases, the result is very bad for any enterprise. Therefore, not having efficient stock control is another error that can affect financial management.
To prevent problems like this from occurring in your business, the ideal is to have very efficient stock control, where all entries and exits are recorded, in addition to the person responsible being able to prepare projections and know the right time to purchase a certain item.
6. Not counting on technology
A very common mistake in companies when talking about financial management is using Excel spreadsheets, or even handwritten ones, to control finances. As such tools are very susceptible to errors, human error or manipulation, they can cause serious problems for the company.
Therefore, investing in technology and having specific software for financial management is a solution that proves to be an investment for any company. With it, it is possible to have control over the entire financial sector, in addition to having security in operations.
7. Mixing personal finances with company finances
We left this error for last, but it is the first one that should be considered in any company. When mixing personal finances with those of the company, the manager loses total control of the financial sector and no longer knows whether the company is making a profit or a loss.
To avoid this, the ideal is for the manager to have his own account, and the company another, where all financial transactions will take place. This allows for better control and each person is responsible for income and expenses.