The great truth of financial management is that you can not do everything at the same time. More than that, nobody is born knowing and the learning process is always done in steps that allow the real absorption of content and adequacy of processes and staff.
We have already talked to thousands of managers about finance and we have come to the model that we consider ideal to achieve the state of the art in financial management.
1) Register your Transactions
For more advanced managers this may seem silly, but it is not even for those who already have a good management system. The very first step, without a doubt, to get a good view of the health of your business is to be able to create a way of recording the movements that are being made.
Of course, there are millions of ways, from a notebook to a financial system, but we believe that the most flexible method is spreadsheet. Because you have the freedom to use in any situation and then manipulate the data either in the spreadsheet cash flow or in a system.
2) Categorize your Transactions
After ensuring that all incoming and outgoing money is being tracked and registered, the next level is to categorize this information. This is an essential step because it initiates a process of data analysis that helps in decision making. Common chart of accounts, you will know which product sells the most and which sells less or also its larger sources and cost variations.
3) View your Results in the Cash Regime and the Regime of Competence
The third step that, in my interpretation, is already well advanced and shows a mature system of financial management is to be able to visualize its movements by the two regimes: box and competence. The summary is that the view per box is the one that sees the inputs and outputs according to the moment they happened and the competence is when they should have happened.
When you make a split sale, for example, according to the jurisdiction, you record the entire sale on the date of the occurrence. In cash management you will be registering as the installments come in. So you can see the immediate health of your company and also if it has a healthy operation.
4) Rate Costs by Area
The next level is to create an even more separate their general financial management by cost centers. Just like in the chart of accounts, this way you will get even more intelligence out of your spreadsheet or system, because now each department or business unit will have its own profit structures and cost structures.
5) Design the Future
Finally, the highest level of financial management is to manage not only to control the present and to take valuable information from it, but also to have a good vision of the future. Doing the financial planning of your business, you'll be able to anticipate big events and schedule yourself so you do not get caught off guard!
What stage are you in? Need help or are you having questions? Leave your comment below!