For many companies, when it comes to finances, they immediately think about how much they are selling and profiting from sales. However, if we talk about the company’s financial health, we cannot just analyze sales and profits. We have to consider complete business financial management.
This financial management depends on a series of factors and actions, such as the use of technology with integrated management systems, accurate and quickly accessed information for correct decision-making, inventory control, and accounts payable/receivable, among many others.
Using an analogy, the company’s financial health needs more in-depth examinations, as in the case of our physical health when we go to a doctor, for example, so that we can have a more accurate analysis of what is really happening in the organization, financially. Talking.
In this post we will talk about how to keep your business financial health up to date, investments, how to avoid the villains that interfere with finances and how technology can help your company when it comes to finances. Follow along.
What is Financial Health?
To fully understand what financial health is and its importance, simply consider that good financial management will not only guarantee the health of your company as a whole, but will also ensure your peace of mind as a manager and/or entrepreneur.
When you maintain solid numbers and considerable financial liquidity, all your commitments previously made with third parties, for example, are honored on time. There are no financial “bumps”, which lead to unforeseen costs and expenses.
There is more time (and money) to increase profits on investments or even to invest in equipment, machines, technology, marketing, etc. But how to keep the company’s financial health up to date ? The basis of everything is good financial management, but don’t worry, we’ll tell you how.
Financial health concept
By concept, we can understand the concept of financial health as being the balance between all income and all expenses, thus avoiding emergency problems with unforeseen or incorrectly measured debts and burdens.
Making a profit does not guarantee that your company is in good financial health , as it may have long-term debts due, for example, which will inevitably absorb this value that was initially considered as “profit”.
Company’s financial health: do you need help?
If your health is not good, you urgently need medicine. Analogies aside, being in the red is nothing new and does not need to be considered the “bogeyman” of business finance. However, you need to be careful, or it will always get worse.
If you are in the red and your financial health company needs help, understand that this help is more present in analysis and making correct decisions than, necessarily, money to pay off your debts. So, check out 6 important tips:
- Financial analysis:
The first thing to be done to get out of the red is to provide an accurate and careful diagnosis of your current financial situation, as well as identify the villain that generated this situation.
- Control your expenses:
As the old saying goes, there is no point trying to “move the ice”. To control your finances and get out of the red, you first need to control your expenses, even if you have to reduce them in areas and/or sectors that are not vital to your business.
- Negotiate with your creditors:
For creditors, you are still a customer, even if you are already in default. So, renegotiate your debts and try to reach a common denominator that can benefit your finances.
- Stay on track:
Once you manage to get on track, financially speaking, you need to take care to stay on track, at least while you are still paying off your debts.
- Think about creating an emergency fund:
Since we are talking about financial health, there is another very important saying: prevention is better than cure. Therefore, having an emergency reserve can help you avoid these scares in your company’s finances.
- Expand your business:
Expand into other market niches, always thinking about greater profitability and also invest in attraction marketing, as a way to increase your clientele. This guarantees greater financial profitability in the long term.
How to measure a company’s financial health?
Everything is based on financial management and this needs several indicators that can easily show the manager how the company’s finances are going. Check out some of the main indicators to measure a company’s financial health:
- Revenue index, for careful monitoring;
- Debt ratio (all accounts, even long-term ones);
- Profit margin (deducting all expenses).
- Cash flow (daily monitoring).
What is the best remedy to protect the company’s financial health?
It is possible to consider that the best remedy to protect the company’s financial health is called financial management. But how to carry out good financial management? What do I need, what tools, what should I look at first, how can I get all the indicators with accurate information in real time?
This precision is almost humanly impossible, since a company’s financial data often varies hourly, depending on the business sector.
Therefore, you will need to seek help from cutting-edge technologies to obtain all the information you need and, in this way, be able to correctly manage your business’s finances, thus guaranteeing the company’s financial health.
Business management software is the main resource and the most used to guarantee all this precise demand for financial information, working like a real doctor when the complaint is to identify financial problems.