Financial management is the practice of making sure that all company wide short and long term goals are supported by a prudent and proactive financial plan. Any financial plan, of course, to have any merit, must be attached and reinforced by a sustainable business strategy. This alignment, in return, ensures that all company activities and functions are holistically aligned. Solid financial management enables the CEO and the CFO to collect and analyse accurate financial data and yield insights on operations. This practice helps management to make more informed decisions on liquidity, profitability, cash flows, investments, and in general, support the long term corporate strategy.
In fact, solid financial management requires financial supervision that allows the company to remain successful while also remaining compliant with regulations. This requires both a high-level know how and planning, as well as, boots-on-the-ground for proper execution. To make this work as good as possible, a company needs to have in place efficient and effective processes as well as digitalised (or paperless) processes. ERP or Workflow Management software can help accounting and finance teams to achieve these goals by combining information while ensuring real-time visibility.
Therefore, by integrating financial data with good practices, systems and components, a paperless financial system can facilitate day-to-day operations as well as support long term strategic goals. When these policies are in place, every financial insight required for decision making is available in real time which provides adequate information for any strategic and/or financial decisions. Decision making is fast, while it utilises company resources for company objectives. Financial performance and monitoring must be at the core of any organisation because it equips leadership with a variety of tools, including:
- Liquidity tracking that ensures that the company has enough money on hand to meet its obligations.
- Budgeting to maintain a positive cash flow, allocate funds for growth and/or cope with unexpected events.
- Ensure compliance and keep up to standard with national, international and industry-specific regulations.
- Maximise profits by providing insights on costs that might trigger an increase in the cost of goods or services sold.
- Develop scenarios based on the current state of business as well as estimate plausible outcomes based on changing market conditions.
- Manage relationships with key stakeholders such as government, employees, suppliers, investors and the board of directors.
So, successful financial management provides a conceptual and analytical framework for prudent and proactive financial decision making. The CFO along with the CEO, must help set standards on how the accounting and finance teams will process, protect and distribute financial data with speed and accuracy. These standardised procedures also designate the DRIs (Directly Responsible Individuals) for making financial decisions at any company level, as well as, who signs off on those decisions. CEOs don’t need to be overwhelmed by these practices nor do they need to invent most of them. There are process models and policies available for a variety of organisation types, as well industry professionals or ad-hoc CFOs and consultants that can help guide and execute various financial requirements.