Why planning and managing finance is paramount to any business May 4, 2017

Financial planning allows any business to succeed within an objective and systematic manner, usually by doing this the management team and others in a high position in the company will have a high level of responsibility. The high profile members of the team will take decisions that put the objectives in play.

Financial management is more than just keeping an accurate set of books and balancing the business account. You need to manage the finances so you are never in a problem of overspending and planning well in advance to make sure that all expenditure is prepared for as well as the profit distributions.

The finance management and planning affects all aspects of your business and a company can fail if there is poor financial management and planning. Finance management courses are mandatory for people taking on the responsibility of planning and managing the finances within the company. It is important to take the finance training when you first join an organisation to ensure that you can make the correct decisions when dealing with the company finances.

Benefits of good financial planning to a business

To ensure that all stakeholders in the company are informed of the key objectives.
You will be able to plan for long term financial stability.
Gain an advantage in the market by increasing your resources.
Make effective and efficient use of resources.

Why planning and managing finance is important

Cash management is very important as many businesses have seasonal variations in revenue, usually companies have plentiful cash and other times there is a shortage. When you are building a financial plan, you need to take into account the revenue cycle and keep a tight rein on the expenditure in low revenue periods.

When financial planning is not completed with the highest of standards there could be serious consequences such as payroll not being completed or a supplier not getting paid. If you plan the cash flow, there is always a cushion to help the business owner have a tight hold over their finances.

Businesses can get easily carried away in the present and not think about the future, thinking only about now might mean that the business won’t prosper to its full potential in the future. Financial management and planning will ensure that the owner is always looking into the future to track the growth of the company. The financial plan is constantly getting changed and improved alongside the company.

Financial management includes looking at and planning when to pay the taxes. The management of the cash will trigger whether you have enough money to pay VAT and tax payments. There could be a time of the year where you will receive a high tax bill, the planning and management of finances will alert you to this fact and you can look to reduce your expenditure for that particular part of the year.

As a finance manager you are making many decisions over the month but it can be difficult to tell which decision is correct. Planning finances to help you see whether you’re progressing can be very helpful, for example if you spent money on an advert, in a plan you can analyse whether the advert was a success and it was worth spending the money.

Business finance courses are offered by London TFE, they will provide information on how to create a financial plan, the use of financial data to understand and manage the business and the presentation of data. If you are having problems with financing read more about our business finance courses.