Joseph Stone Capital on the Importance of Financial Management for the Success of Business

 

Running a business is quite a challenging task. With numerous demands on owners and urgent tasks without doubt taking priority, it is not always simple to think about the bigger picture and to find the time to put an appropriate financial plan in place. But, if you want to put the right building blocks in place to create a successful business, then it is financial management that is the foundation to building a business with extensive horizons.

Joseph Stone Capital explains why financial management is important for business’s success:

Financial management allows you to make accomplishments in daily financial goals. A well-designed system will enable you to:

• Be proactive and not reactive to situations
• Borrow easily as needed by planning ahead
• Update investors on financial planning information
• Share budget information with your banker to make the loan approval process easier
• Access a good decision-making tool when considering vital financial problems
• Have efficient and profitable operations

Financial planning empowers business owners by:

• Avoiding needless heavy investments in fixed assets
• Decreasing direct labor costs, supplier prices and other items that have an effect on the cost of goods sold
• Maintaining adequate temporary working capital needs that support accounts receivable collections and inventory
• Setting sales goals that are growth-oriented and not just functioning as an order taker
• Enhancing gross profit margins with efficient pricing of goods or services
• Carrying out better tax planning
• Functioning efficiently with overall administrative expenditures
• Planning ahead for employee advantages
• Performing a sensitivity analysis, which points out how independent variables will impact a decision

Why Develop a Financial Management System?

The primary step towards developing a financial management system is to make financial statements as these allow you to manage for targeted success proactively. Significant financial statements to maintain include a cash flow statement, balance sheet, and income statement.

Developing a financial management system assists manage capital expenditures that every business must think about. In general, you make asset purchases to generate income. Any financial considerations associated with capital expenditures should balance with the amount it takes to make the purchase and the income it will generate. Managing your capital expenses efficiently ensures you will not overextend the business by borrowing too much. Income generated must substantiate the expense.

Joseph Stone Capital believes one of the primary financial responsibilities of any business is to keep expenditures as low as possible. You can try to accomplish this in several ways such as asking vendors to reduce prices, reduce staff or decrease energy usage – all without compromising the business production quality. Nevertheless, if you do not manage costs, your business will be on a never-ending cycle to stay floating just to pay operational costs.

Paying taxes is a belief in your personal life and business. You have a financial responsibility to plan for payments to local and federal taxing authorities. Or else, profits can fade away in penalties and interest on late payments. Tax planning includes ensuring there is enough cash on hand to make estimated tax payments each quarter they come due. Failing to plan and make the most of available deductions will cost more in taxes and leave less to invest in the business development.