The SME (Small and medium-sized enterprises) that seeks to maintain or grow profitably must measure financial management systematically over time. Looking at the past situation that the accountant brings after three months can put us in a situation of vulnerability. While modern finance should take into account customers, processes and employees, the financial measurement itself should have a more intense and faster treatment. Due to the great importance of observing financial data, who must make them should be a figure that develops as a team along with other sectors and not only liquidating tax. You should have an expert like Sean St John National Bank who has good experience in the management of the financial system. Toronto’s Sean St. John has spent the last 25 years of his professional career working in the banking and financial industry. Here are some basic points to evaluate the financial management.
Basic points of a measurement plan:
A cash flow is an income or expenditure that occurs in a certain period. The important thing here is to get ahead and detect it in time, especially if this is negative, that is, if the expenditures are greater than the income. Knowing how the box is coming in time will allow us to make better decisions. For example, do I buy inventory? Do I cancel debts? Do I invest in improvements? Do I channel the surplus to another financial instrument? Is the working capital positive or will I need funds?
All decisions carry an implicit risk. The theory holds that the higher the risk, the greater the profitability should be. That is why decisions should not leave the risk aside; Doing it means exposing ourselves for free. The risk is always present in all the actions and decisions that we face. However, we cannot dissociate it from profitability and from the particular risk that decision-making entails. What level of risk am I willing to support? Should I take debt and leverage myself to grow? Or should I offer discounts and speed up the sale? It is inevitable; risk always appears, especially when one does. Planning is key; we must define what level of profitability I want to obtain and what the risk I want to face is.
This implies knowing precisely the detail of sales and the cost of merchandise sold. It seems obvious, but it is not. Sometimes, determining the real cost of merchandise can be complicated. It is also essential to quantify marketing and administrative expenses. Know the level of discounts granted and by customer segments as well as, the returns by customers, sellers, business units and general.
Actives and Passives:
It should be noted the evolution of assets and liabilities, short and long term. How do my realizable assets come? Or do I buy items that do not rotate and generate a heavy tax burden of holding results at the end of the year? What is the proportion? How are the debts receivable (aging) distributed in days? Do I collect everything short or long term? Am I financing short assets with long-term debt? Do accounts receivable grow? What level of fees am I paying for financing? Is the liability with the asset? How does it evolve over time? What guarantees did I grant? How are the debts composed, are they fiscal, social, commercial, banking? Fixed assets? And the investments
Aging of debt:
It consists of periodically monitoring the distribution in days of accounts receivable. It is key to observe compliance with sales policies. If this is not in control, it is likely to increase the days to collect.