08 mistakes to avoid in your company’s financial management

To err is human, but to persist in error is foolish. Anyone who has heard this maxim knows that it becomes even truer when applied in a corporate context . After all, there is no room for error in such a competitive market , and even the smallest mistakes can have serious consequences for the financial health of a business .

When a company closes, it is rarely the fault of accounting, but rather of the cash flow! Or the lack thereof!

If you also believe that profit is king, but that cash is the boss , and you want to know what the main mistakes in financial management are , then check out the following and understand how to avoid them:

1. Not separating personal and business expenses

This is one of the most common mistakes and is crucial for anyone who wants to manage a company’s finances well . Therefore, separating personal expenses from  business expenses  must be part of the company’s culture and become part of the business routine .

To make this easier, avoid taking your personal accounts to the company and vice versa. Have a corporate credit card to pay for lunches and other company-related expenses and do not use cash from the cash register to pay your bills, which should be done with your salary or by withdrawing profits .

2. Not recording everything

Another deadly management sin occurs when all inflows and outflows of resources are not recorded , and those of smaller value are usually forgotten, such as coffees, purchases of small materials, among others that individually do not seem to have significant value, but which impact the result and can compromise the  financial planning  as a whole.

Detailed records of   all  expenses and income  make it possible to know where the company’s money comes from and where it goes , and thus cuts or substitutions can be made in expenses , income can be better understood, that is, who are the main customers , the best payers, among other details essential to management .

3. Not having a management system

Not recording expenses  in a good  management system  can also represent a big mistake in your financial management . Therefore, looking for smart, integrated and practical solutions is essential for you to control your finances completely, quickly and safely for the decision-making process .

In addition to controlling all inputs and outputs efficiently, when using a system you will have greater ease in organizing payment and receipt dates , and thus avoid delays and payments with interest.

4. Not using financial tools

Not using financial tools , such as  cash flow , is a mistake, as it is not possible to know in detail the main inflows and outflows of resources, as well as the amount available in a given period.

Therefore, it is necessary to implement this and other tools , use them appropriately and integrate them into the company’s day-to-day activities so that they can also be used for decision-making, helping managers  to take the right path and choose the best paths for the company .

5. Not monitoring performance indicators

You can be sure that monitoring finances is just as important as carrying out detailed strategic business planning . After all, by evaluating the company ‘s performance , managers can make more accurate decisions that focus on their real needs. Reactive management , which only puts out fires, is abandoned and given way to proactive management .

To do this, you must monitor performance indicators . Basically, they work as a thermometer that helps you monitor the financial health of your business. Some examples of important indicators for finance include debt levels, revenue, and profitability.

6. Not setting SMART goals

Another very common mistake among our business community is the difficulty in setting goals , especially when it comes to finances . In most cases, managers completely ignore the indicators we mentioned earlier and act in a disorganized manner, which ends up generating undesirable debts .

The secret to setting financial goals is to follow smart goals . Basically , the idea is that every goal should be specific , measurable, achievable, relevant and timely. This way, we can ensure that it is within the reality of the business .

7. Not making financial projections

What is the point of having a record of a portrait of the past if it does not help us make better decisions in the present, considering the commitments already planned for the future?

This error comes from the two previous ones, that is, the lack of smart goals for the business and not using performance indicators . Making projections is essential in any planning , because this way we can anticipate needs and prepare for any type of situation.

Cash flow projection is one of the most important, and the manager only needs to regularly monitor the movement of operational activities . This makes it easier to predict what will happen in the future. Obviously, debt and investment projections , for example, are also essential for the organization .

8. Not creating a strong organizational culture

When we talk about finances, it is important to remember that it is not just the manager who deals with money, especially in relation to SMEs . The fact is that many employees end up carrying out operations. Therefore, it is very important that they are aware of the importance of each of the records made .

A very common mistake in some companies is the lack of a strong organizational culture , which is based on accountability . It is very important that employees, from the receptionist to the delivery person, know exactly how important it is to record the operations carried out.

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