Financial Management

What is Financial Management?

Money to your company is like blood to your body. Just as the body can bleed to death, so can your company. So the money must be there. And it’s your job to know how much there is, and where it is.

If you decide to take on the responsibility for managing the finances, some of your duties will include:

  • Keeping track of the company’s money – accurately recording all transactions.
  • Understanding the financial implications of all the company’s activities.
  • Reporting accurately on the company’s financial position. You should ensure that people owing money to the company (debtors) pay their bills, and ensure that people owed money by the company (creditors) are paid.

Some skills and qualities you will need to develop

  • Communication skills: the ability to make complicated things understandable
  • Report writing skills: your financial reports should be accurate, tidy and easy to follow
  • Organisational skills
  • Numerical skills
  • Problem solving skills

Your role and responsibilities

Keeping track of the cash:

  • Keeping a record of all money coming in to and going out of the business is essential. Use a sheet for cash received and another one for purchases made.
  • It is your responsibility to make sure all cash is kept safely.

Profit & Loss Account and Balance Sheet:

  • These financial accounts must be prepared before you wrap up the business.

Decide on salary levels:

  • Liase with Human Resources to work out what the company should and can pay in salaries, wages and commission.
  • Calculate the figures and work out what this is going to cost the company in future months (as soon as possible).
  • Agree the rates of all salaries at a company meeting as soon as possible and record the outcome for your own records.
  • Establish a system whereby Operations and Human Resources inform you of hours worked and/or production/sales achieved so you know what to pay.

Pricing:

  • Work out and record the “fixed and variable costs”, liaising with Operations.
  • Meet with Sales and Marketing to discuss prices of your product or service and calculate how many items you have to sell to meet these costs or break even point.
  • Agree with them a price to recommend.

Prepare budget statements:

  • Liase with Marketing to estimate level of sales.
  • Complete the Profit and Loss Statement.
  • Complete a Cash Flow Statement. This is optional, but desirable. But if you are buying large quantities of materials or intend to have credit sales it is essential.

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