3 Key Components of Successful Business Finance Management

Business finance management involves handling an organization’s finances in a way that supports long-range financial stability and growth. Although there are many moving parts that make up a well-designed financial management strategy, it all starts with putting the essential building blocks in place.

The Building Blocks of Business Finance Management

From the back-office tasks of bookkeeping to the upper-level financial strategies, successful business finance management requires the combination of essential building blocks and key professionals. The setup may vary depending on the size of the business, but the key building blocks remain alike. 

• Increase efficiency and drive growth with accounting technology solutions that work behind the scenes.

• Have key staff in place:
  • Staff accountants and bookkeepers overseeing the day-to-day financial records to allow for quick access to key information necessary for business decision-making.
  • Financial controllers that provide invaluable financial data analyses that help shape the business’s growth strategy. 
  • Chief Financial Officer (CFO) that provides executive-level strategic planning and assists with building the financial infrastructure a business needs to grow and scale. 

With all essentials in place, a business can meet or exceed current and future objectives.

Three Key Components of Business Finance Management to Consider

While business finance management involves several objectives and strategies, three key components prove to be important.

1. Maximize Cash Flow

Maximizing cash flow is critical and is an area where many businesses struggle. According to QuickBooks, 61% of small business owners experience cash flow issues, and approximately a third have difficulty paying their bills and making payroll. The inability to pay vendors or meet payroll obligations is a serious problem that could compromise an organization’s ability to keep its doors open. 

Simply adjusting a few practices can make a significant difference in cash on hand. Cash flow maximization strategies include:

•  Staggering vendor payments  

Spread out monthly vendor payments instead of paying them all at the same time. If possible, schedule vendor payments around forecasted sales spikes, and distance them from other large financial responsibilities like payroll. 

• Aggressively monitoring accounts receivable (AR)

As many as 93% of companies deal with late customer payments. Tighten AR practices to reduce late payments. 

• Strategically pricing services 

Adjust pricing models, as needed, to maximize cash intake. Don’t forget to factor in all costs, including overhead.

2. Budget and Strategize

Budgeting forces a company to focus on cash flow and increases insight necessary for making and keeping effective goals. When current financials are clearly laid out, it is easier to focus on new goals and sales projections. Budget information is also useful when deciding how to handle extra revenue when goals are reached. 

After creating a budget:  

• Define a target revenue or sales volume.
• Determine how to bring goals to fruition.
• Consider expenses, cash flow needed, and how to allocate additional revenue when it is generated.

3. Be Flexible

In business, the only true constant is change. Even with the best-laid plans, businesses should have plans in place to adjust when necessary. 

Be prepared! Create plans for curveballs that could force deviation from your financial strategy. For example, if revenue in a high-sales-volume month is allocated toward certain expenses, create a plan B in case revenue doesn’t flow as expected. Decide what steps will be taken if sales volume is lower than forecasted. Businesses most capable of pivoting during periods of change are best able to weather unexpected storms.

What is Your Optimal Business Finance Management Strategy? 

Managing business finances is one of the most critical and time-consuming aspects of running a business. Sometimes, you need help from outside sources who specialize in business finance management. The A Team has you covered! From essentials like staff accountants and accounting technology, to Controllers who manage financial health, to experienced C-suite level fractional CFOs, we are there for you at every level and stage of your business. Contact us to see how we can best support your business.