The 7 most common mistakes in financial management of a company and how to avoid them
Achieving efficient financial management is a fundamental task for any company. After all, without the correct control of the money that comes in and out of the business, it becomes increasingly difficult to walk the right path towards business success.
To prevent your company from going off the rails and diving towards failure, it is worth keeping an eye out for the most common mistakes in the financial management of a company. Want to know what they are? So continue reading today’s article and discover 7 of these frequent mistakes, which can lead any business downhill.
1. Not knowing the costs and expenses of each service
Calculating the price of services offered to your customers is not one of the easiest tasks to perform in the corporate environment. Despite this, knowing how much the service costs and what the company’s profit margin is essential – no matter the situation or the area of activity of your company.
If you still don’t know each of the costs involved in offering your services, you are certainly making one of the most common mistakes in the financial management of a company. To avoid this mistake, try to know all the internal factors that impact your price – and, if possible, also the external factors.
Knowing the correct amounts to be charged for the services provided or correcting any price problems in your business can make a big difference in the financial health of the company. And, if not corrected in time, this error could even result in the death of the business in the medium and long term. Therefore, redoubled attention!
2. Not having a management system
Not using a day-to-day management system is one of the most common mistakes in the financial management of a company – no matter its size. The lack of this tool makes the manager unaware of the details of the operations and processes of his own business, exponentially increasing the chances of errors and difficulties in all sectors of the company.
Therefore, when it comes to controlling cash flow and the services offered to customers, nothing better than a financial management system, which allows users to monitor the most diverse information inherent to the financial management of the business. . Knowing and correctly controlling this data allows the manager to recognize possible problems and even opportunities, helping the company to grow over time.
3. Not recording the operations carried out
Not keeping the habit of recording all business operations is quite common among Pak managers – especially those who control micro and small companies. This practice, however, is extremely harmful to any business.
The lack of these records causes the company to walk without control and, consequently, without the correct direction. Therefore, keeping the database of your financial management system always supplied in relation to the financial operations carried out is essential for the business to sustain itself over time and for it to stand out in an increasingly competitive market.
4. Neglecting the financial cycle of operations
Knowing the movement of capital within your business is one of the steps to good financial management in any company. It is necessary to identify each of the stages of entry and exit of money from the business, in order to look for possible points of improvement and possible mistakes, but also with the objective of always keeping informed of what happens in the company when it comes to money.
Each company has a particular capital movement, which usually respects the processes that involve the business. Neglecting this cycle can lead you to withdraw money from cash flow and disorganize all processes in the short, medium and long term!
5. Not doing the balance sheet
Doing a balance sheet periodically is mandatory for any company – regardless of its size or industry. After all, it is through this balance sheet that the growth or decline of the business is more clearly identified, and it is through this accounting that order and business planning are maintained.
The balance sheet helps identify the need for expansion or retraction of a business, while demonstrating the company’s equity value – which may involve movable and immovable property, for example. Maintaining the habit of doing this balance sheet with a certain frequency, therefore, is essential for the health of the business.
6. Not fixing a pro-labore
One of the most common practices among micro and small companies – which is also on the list of the 7 most common mistakes in the financial management of a company – is not to set a pro-labore amount, to be withdrawn monthly by the business partner or partners.
In addition to avoiding fights between partners, a fixed remuneration allows entrepreneurs to remain motivated, since he will receive proportionally for the amount invested in opening the company, every month.
The lack of a fixed pro-labore, on the other hand, can lead to demotivation, fights and a lot of financial disorganization – which can lead any business to bankruptcy.
7. Not separating personal expenses from business expenses
Another common habit in small and micro businesses, not separating personal expenses from business expenses can harm – and a lot – any business, regardless of its size. Using personal money to pay off company expenses or vice versa can lead the entrepreneur to bankruptcy or end the financial health of the company, also causing the business to die at some point.
The practice messes up the financial planning and organization of the business – and of the partner himself, causing the loss of reference to what is company money and what is personal money. Therefore, if you usually mix personal expenses with business expenses, it’s time to rethink your habits and eliminate this practice right now!
