6 financial management tips for small and medium businesses

In addition to making the enterprise safe, good financial management is even a competitive advantage. It is from it that a sales price, a discount policy, and even a marketing budget are correctly defined, for example.

Do you want to optimize your company’s financial management? Discover 6 tips for beginners or experienced entrepreneurs!

6 financial management tips for small and medium businesses

1. Separate personal from business finances

In the financial management of micro, small and medium-sized enterprises, a problem is common: the lack of separation between personal and business finances.

This causes the entrepreneur to pay personal bills with business money or corporate payments to be received in the individual account. However, this mixture of values ​​jeopardizes the vision of the company’s real financial situation.

Therefore, it is not possible to know what the company’s true performance has been over time. To avoid such a situation, the ideal is to have an account for an individual and another for a legal entity. Thus, it is necessary to have discipline to completely separate all financial transactions.

So you should not make withdrawals from the company account, for example. Instead, establish a pro-labor value, which is a kind of remuneration for the entrepreneur. With it, you will have greater control over the financial issue and avoid problems related to the division of accounts.

2. Set up a business budget for financial management

Among the financial management tips for entrepreneurs is the need to make complete planning. This tool will help define the best way to conduct business finances, guiding decision-making and evaluating results.

In this financial planning, you need to consider what your business goals are. For example, in relation to the growth, you want to achieve. After setting goals, it is necessary to develop a business budget.

Its objective is to plan the distribution of resources among the various sectors and tasks of the enterprise. In this way, it will be possible to know exactly how to use the money to fulfill obligations and facilitate the achievement of objectives.

In addition, this is a way to exercise more financial control, as it is easier to predict where the money should be directed. Therefore, the budget is an important resource to increase the overall security of the business and management.

3. Control cash flow

To manage business finances, it is necessary to use strategic tools that help in the control of information. One of these resources is the cash flow, whose objective is to record all the financial movements of the company.

By using it, you can identify which resources entered and which left the enterprise in each period. Thus, it will be possible to check if there are expenses not foreseen in the budget and if the strategic planning has been fulfilled, for example.

You can also use projected cash flow or on an accrual basis. It consists of accounts receivable and accounts payable. In this way, it is possible to understand which periods require more cash resources and when there is greater financial availability.

It is important that the cash flow – projected or not – is constantly updated. Therefore, it is worth doing it and analyzing the data daily, as the information brings more visibility to the performance of the enterprise.

4. Reduce customer delinquency

To attract customers and convince them to close the deal, it is common to offer different payment options. However, it is necessary to be careful with term receipts, due to the risk of default.

This situation occurs when the customer does not make the payment within the agreed period, leaving the amount pending. The problem is that default can cause financial imbalance, compromising business continuity.

For this reason, it is essential to measure the default rate. It serves to indicate the volume of late payments, in relation to the total owed by customers. That way, you can easily track any defaults.

In addition to measurement, it is necessary to implement measures to prevent or reverse default. For example, having a stricter credit granting policy or a consolidated collection strategy — based on a collection rule, for example. Thus, it is possible to keep the cash flow more balanced.

5. Analyze performance reports for financial management

In addition to putting these financial management tips into practice, micro-entrepreneurs and entrepreneurs of small or medium-sized companies should be concerned with data for decision-making. Therefore, one of the recommendations includes analyzing the financial reports.

You can use, for example, the Income Statement for the Year ( DRE ). It indicates whether the company makes a profit or a loss and what is the composition of income and expenses. From this, it is possible to identify where the bottlenecks are in order to trace corrective actions.

There is still the possibility to analyze custom reports. You can define which indicators you want to track to gain specific insight into parts of the business — such as profitability and pricing.

In general, it is essential to use the reports to understand what has been going well and what are the difficulties with the finances. Thus, you can make informed and efficient decisions, increasing the company’s chances of standing out in the market.

6. Use financial management software

As you have seen so far, quality financial management is essential for any business to succeed. Therefore, doing it manually is not the best alternative, due to the excessive consumption of time with this activity and the high chances of errors.

Instead, it’s best to make smarter decisions and use technology to your business’s advantage. In this case, it is worth hiring financial management software. With it, you will automate data entry and also integrate information with ease.

With these 6 tips for entrepreneurs, you now know how to manage your business finances. After putting them into practice, you will be able to notice an improvement in the results. So organize your company’s financial management as soon as possible to enjoy the benefits that this practice will bring to your venture!