Sorting Out Your Accounts

How To Build a Strong, Healthy Financial System for Your Business

by Lydia Washington

It's no secret that a healthy financial management strategy is key to the success of any business. With no clear understanding of financial statements and strong financial management practices, your business could quickly find itself in trouble and devoid of any growth.

So, whether you're just starting in business or you've been running your company for years, these strategies will help you streamline your financial operations and improve your bottom line.

Create a Financial Plan

The foundation of any successful financial management system is a solid financial plan. This plan should outline your company's short and long-term financial goals, as well as the strategies you'll use to achieve them.

When creating your financial plan, you also need to be realistic and set achievable goals that challenge you to grow your business.

In addition, monitor your finances daily. To do so, you can:

  • Check on daily sales, budget vs. actual, cash flow, and receivables.
  • Watch your bank account credit score and make sure you're not overspending
  • Create a system for recording financial transactions

But, to effectively manage your finances, you need a system that keeps a record of all financial transactions. An experienced accounting service can help you track every transaction you make. This way, you'll have a clear view of your company's financial health.

Keep Up-to-Date Accounting Records

Along with recording financial transactions, you will need to keep updating your accounting records. This step will help you track your company's economic progress and identify any areas that need improvement.

Ideally, review your accounting records at least once a month and make necessary adjustments. You may also use financial statements to monitor your business. These statements are another important tool for monitoring your business's economic trajectory.

The main financial statements often include:

  • The balance sheet. This statement will show your business's financial position at a specific point in time.
  • The income statement. The statement shows how much money your company has made or lost over a specific period.  
  • The cash flow statement. This statement tracks the movement of cash in and out of your business.

By reviewing these statements regularly, you'll be able to track your company's financial health and identify any areas of concern.

Use Technology to Your Advantage

There are plenty of tools and technologies in today's digital age to help you improve your financial management practices. For example, several great accounting software programs can automate many financial tasks for you. This could be as simple as tracking income and expenses in a spreadsheet or using accounting software.

Such programs can help you manage your finances more efficiently and keep you on track with your financial goals. In addition, many financial websites and apps can provide valuable insights into your company's financial status.

Suppose you want to gain better insights on how to run your business effectively. In that case, you can always reach out to a reliable business advisory professional to understand what needs to change.