Dated: 01 May 2003
There is one simple reason to understand and observe financial management practices
in your business - to avoid failure. Eight of ten new businesses fail primarily
because of the lack of good financial management.
Financial management affects how and on what terms you will be able to attract
the funding required to establish, maintain, and expand your business. Financial
management determines the raw materials you can afford to buy, the products
you will be able to produce, and whether you will be able to market them efficiently.
It affects the human and physical resources you will be able to acquire to operate
your business.
New business leaders and managers have to develop at least basic skills in
financial management. Expecting others in the organization to manage finances
is clearly asking for trouble. Basic skills in financial management start in
the critical areas of cash management and bookkeeping, which should be done
according to certain financial controls to ensure integrity in the bookkeeping
process.
What is financial management? Very simply stated, financial management is the
use of financial statements that reflect the financial condition of a business,
to identify its relative strengths and weaknesses. It enables you to plan, using
projections, future financial performance for capital, asset and personnel requirements
to maximize the return on your investment.
When an entrepreneur understands financial management, he is better able to
analyze and better understand the ‘reality’ of his business.
We take a look at this issue this month and offer tips on how entrepreneurs
can save themselves from falling victim to financial mismanagement practices.
Used wisely, they will make you (the small business owner/manager) familiar
enough with the fundamentals to have a fighting chance of success in today’s
highly competitive business environment.
Many of the articles were designed to equip you with the information required,
to acquaint yourselves with the basic tools of sound financial management. These
articles may also be used by anyone interested in learning the concepts of financial
management.
Therefore, with a working knowledge of this important management tool - financial
management - then this will be a major determinant of whether or not you will
be able to make your hard work profitable.
The best of all things is to learn. Money can be lost or stolen, health and
strength may fail, but what you have committed to your mind is yours forever.
-- Louis L’Amour
|
