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How to manage finance

Financial management: a simple but complete guide for SMBs

Proper financial management is the guarantee to a stable and growing business. It is extremely important, especially for startups that don’t yet have a reliable financial strategy. It is worth mentioning that two-thirds of SMBs survive only two years. Often, the problem is that some companies don’t allocate enough resources to prepare accurate financial reports, analyze the sales statistics, and make a well-thought-out strategy,  as a result, they minimize the chances of significant business growth.

For small businesses, organizing financial management may become challenging, as SMB owners are constantly lacking time and money. Today, we will focus on the basic steps that will help you build efficient financial management in your company without any additional investments.

Overview:

What is financial management?

What does a financial manager do?

How to manage finances efficiently: 9 best practices

Cash flow management vs financial management

Key takeaways

What is financial management?

Financial Management is the organization, planning, and control of the company’s finances, such as funds, cash flow, loans, investments, and so on. In general, financial management includes bookkeeping, preparation of financial statements, and projections for the nearest future. The combination of this data facilitates decision-making for business owners.

The complete financial reports help to choose the right price policy, reasonably distribute the profit, hire new employees, purchase the inventory, and wisely invest into business growth. Moreover, any significant changes in business strategy should comply with the finances of the company. For example, businesses, which are going to diversify their product lines, need firstly to overview the most profitable products in their financial statements.

Over the last few years, experts also started to appeal to the definition of “strategic financial management”. According to Investopedia, it means not only managing a company’s finances but managing them with the intention to succeed — that is, to attain the company’s goals and objectives and maximize shareholder value over time.

If financial management is a must-have for all businesses, strategic financial management is even more necessary for companies that need to ensure a stable and reliable return on investment. That is why strategic financial management requires the professional assistance of accountants, financial managers, and business analytics.

But don’t be terrified by the high prices of financial experts. If you have a small business, you as a business owner will be able to manage finances on your own. The only thing you need is accurate books and the desire to improve your company.

What does a financial manager do?

A financial manager can be a staff member or a temporary consultant. It depends on the needs of the company. Usually, small businesses with less than 1000 transactions per month don’t need to pay a financial manager each month, but it makes sense to get a professional consultation once by the end of the year. At the same time, fast-growing companies and promising startups should add monthly expenses spent on a financial manager to their budget.

A financial manager is the last step after a bookkeeper and an accountant. He analyses all the payment data, prepares financial reports, gives a summary, and provides a long-term financial strategy.

Business owners usually consult with financial managers to make important decisions that may influence the company’s financial well-being. The main goal of the financial manager is to maximize the business’s profit.

How to manage finances efficiently: 9 best practices

  1. Keep an eye on your books

It seems obvious for businesses to add payment information to their books. Books play an important role in reconciliation, setting prices, and analyzing the most profitable product lines. However, many companies don’t update transaction data on a daily basis. They leave it till the very last moment of the tax season and then have to spend hours nervously filling in the transactions in their books. As a result, an accountant gets the books full of errors and incorrect payment data.

The best solution for business owners, who don’t want to spend too much time and effort on manual bookkeeping, is to consider connecting an accounting automation software, such as Synder. It automatically imports historical and ongoing transactions into books, provides detailed information about each payment, and allows reconciliation in just two clicks.

When your books are 100% accurate, you can be sure that you will not underpay or overpay taxes, or wrongly plan annual and monthly expenses.

  1. Pay and get paid on time

Financial management is closely connected with cash flow management. If you cannot organize the regular transactions, then you can hardly plan your finances and make business projections. Cash flow is the process of receiving and making payments. When all cash flow processes are automated and carried out without delays, it is much easier for businesses to keep up with financial goals.

The cheapest and most effective way to pay, and get paid on time, is to use online payment processors. There are many apps that provide invoicing features for companies. How does it work? You just need to fill in the payment details (product, customer, shipping, price, etc) in the invoice form and send it to your client. Usually, such applications and online tools also allow you to send automatic reminders to customers who forgot to pay the invoice.

Synder leveled up the invoicing process and suggests small businesses use “payment links”. Business owners, who sell through social media mostly, will find this feature extremely useful. You can create a payment link in Synder and attach it to your Instagram profile, for example. The clients will click the link, pay the invoice and get the product automatically.

  1. Make a habit to prepare financial statements regularly

Financial statements are the best tool for productive financial management. There are a great number of reports that you may find helpful in finance planning: Profit and Loss statements, balance sheets, cash flow statements, income statements and many more. All these statements allow you to summarize the company’s results over a month, quarter or year.

To create financial reports quickly and easily, it’s possible to use e-commerce accounting software, such as Synder. This software collects the detailed payment data that is essential for accurate reports. Create the main financial statements regularly to track your business progress.

  1. Keep good credit

Financial management includes not only cash flow planning but also the assessment of business funds and loans. Even when the cash flow is positive, it doesn’t mean that the company is profitable.

The number of outstanding loans and lack of funds may radically influence a business’s welfare. To get a thorough overview of a company’s finances, business owners need to analyze all debts and assets. Real estate, investments in funds, business loans, unpaid bills and many other aspects should be reflected in the annual financial statements. Unfortunately, it is difficult to avoid taking loans at all, however, it makes sense to plan a budget and schedule the payments.

Only when a business owner (or CEO) completely understands the financial condition of their business, can the business survive.

  1. Organize your taxes

For many businesses, the tax season is a period full of stress, paperwork, and additional expenses spent on bookkeepers and accountants. One of the biggest pain points is counting taxes correctly – don’t underpay or overpay them. However, if you keep your books ready for the tax season, you will no longer have to worry about it. When all payment transactions are in your books and they match your checking bank account, you just need to summarize all the taxes and file the tax return to the IRS.

But financial management isn’t only about paying taxes correctly, it is also about minimizing them. Professional financial managers recommend businesses to look for tax deductions and lower the profit by increasing the spendings. These 2 tactics are the most popular and effective among business owners. It will help you cut down the expenses on taxes and achieve better financial results.


  1. Set up a budget

Budgeting is the planning of a company’s spendings, such as salaries, real estate rent, inventory purchases, etc. based on the business income and expenses. Usually, creating a budget plan is the first step in financial management,  as it is an essential part of both financial strategy and business strategy. It helps businesses estimate expenses in advance, make the company’s finances prepared for them, and predict the net profit of the company.

Budgeting allows business owners to close at least 3 main tasks:

  • Save money on unnecessary or additional spendings
  • Organize outcoming payments (for example, for suppliers or vendors)
  • Increase the income.

It is recommended to make a budget for a month and for a year to keep track of the company’s expenses. This way if you see that your expenses exceeded the permissible plan during a month, you will be able to update and optimize the annual budget to finish the year with a profit.

  1. Plan the financial strategy

Financial strategy is the synonym to a financial plan, but with a long-term perspective. Usually, the financial strategy includes not only profit goals, but also the assets of risks, the analysis of business opportunities, economic threats, and much more.

To prepare a decent financial strategy, you need to take 3 essential steps:

  1. Highlight the main business objectives precisely
  2. Analyze your potential resources and partnership opportunities
  3. Make an accurate target audience profile

These steps will give you an overview of your business so that you will be able to calculate the approximate income and predict future growth.

  1. Invest in business development

It is a big mistake for business owners to spend all of their income on regular business needs and not invest in business growth. There is always a lack of money spent on advertising, new product lines or services, and professional employees. However, without these spendings, your business won’t grow. It’s important to set aside a certain percentage of the company’s profit for better business opportunities. Then your business will achieve stable growth in the direction of financial success.

  1. Choose an accounting software

Accounting software is like a  personal financial assistant for small and medium businesses. It carries out all bookkeeping and accounting work for your business, so you can relax and enjoy accurate books and paid taxes. Moreover, many financial experts emphasize that investment in annual accounting software is much cheaper than the assistance of expensive accountants and paying them per hour.

One of the most popular solutions among business owners and secure accounting software for e-commerce businesses is Synder. This accounting automation software already won the trust of thousands of SMBs in the USA, UK, Canada, Australia, etc.

Synder:

  • Automates the bookkeeping of your transactions;
  • Records multi-currency sales;
  • Imports your historical transactions;
  • Manages your incoming and outgoing payments;
  • Reconciles your books in one click;
  • Connects all sales channels and payment gateways such as Shopify, Stripe, Square, Etsy, Amazon, eBay, and many more, within one interface;
  • Provides you with detailed data for sales, tax, and other necessary reports.

There are a lot of guides and video tutorials available that will help you to get the best out of Synder. And for those who need any emergency assistance with their books, Synder provides 24/7 personal support for free. Book a free demo right away to level up your finances!

Cash flow management vs Financial Management

Cash flow management and financial management are similar terms, but still have some differences that should be taken into account.

  • Cash flow management is the optimization of incoming and outgoing payments over a specific period. Companies need to track the sales and regular expenses to understand the profitability of the business.
  • Financial management is the strategic planning of business finances. It means the projection of business growth.

For these 2 types of management, business owners need to prepare different financial reports. For example, the Profit and Loss report is enough for cash flow management. This report allows a company to set sales goals and plan expenses, but it will not show the real picture of business success.

To build up effective financial management, accountants and financial managers need to prepare more detailed statements that also include projections. On their basis, business owners can make decisions about the company’s directions of development.

Key Takeaways

  • Proper bookkeeping is the first step in successful financial management.
  • The systematization of regular payments is the basis for the completion of financial goals.
  • Know your essential expenses and pay taxes on time.
  • Make financial plans and set income goals for both short-term and long-term perspectives.
  • Use modern technologies such as online accounting software to enhance the tracking of your finances.

Start a Free Trial in Synder right away to keep your business growing!

Anastasiya Liakh

Anastasiya Liakh

Anastasiya is a specialist in Digital Marketing with extensive experience in Fashion and Law business industries. She has a higher degree in International Private Law, specializing in Corporation Law and Intellectual Property. In her spare time, Anastasiya writes exclusive columns for print media, runs her own online magazine, and practices stock trading. Her field of interests includes finance management, e-commerce, and business digitalization.

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