Many promising developments end up falling apart due to poor financial management . After all, no company can remain healthy and scalable without its corporate finances being stable and well controlled.
It is common that, even with a lot of experience, the managers of the financial area end up not being able to deal with finances the way they should, either due to lack of time, because they are overloaded, or because they are not up to date, or for other reasons.
So, to inspire you to do more efficient and powerful management, we wrote this post. Here you will have lots of information about corporate finance , as well as tips on how to improve financial management , contributing to the success of the business. Read to the end!
What are corporate finances?
Did you know that, although many believe that companies only emerged after the 16th century, the first ventures, in fact, have existed since the Middle Ages? From then on, corporate finance became part of the routine of managers and employees.
If we are to define them in a more theoretical way, we can say that they are the area responsible for making financial decisions for a company, using the analysis and tools necessary for this purpose.
Its main objective is to maximize the value of the business and also manage the financial risks that exist. Basically, they concern all financial aspects of the company.
There are some financial indicators that serve very well to guide your service and make you monitor the health of your corporate finances and thus have good criteria when making decisions. See which are the main ones:
- Profitability:this is one of the most important indicators, as it shows whether the business is generating good results in its operation. In short, it represents the profit obtained from the products or services sold in relation to the total revenue and its calculation is made from the division between gross revenue per month and net profit.
- Cash turnover:this is the indicator that represents how many financial cycles the company’s cash has per year. It shows the absolute number of times that the money circulates, that is, it comes and goes from the venture’s cash in a period of twelve months. To calculate it, it is necessary to calculate the financial cycle before using the following formula: CCC (financial cycle) = DIO (average inventory term) + DSO (average term to receive sales) – DPO (average term to pay suppliers). After that, the cash turnover can be calculated as follows: GC (cash turnover) = 365 (days of the year) / CCC.
- Billing:the billing corresponds to the sum of sales in an established period, that is, all the money that enters the cash from the sale of services, products, etc.
- ROI (return on investment):when evaluating ROI, the company is able to verify if its resources are being well used, that is, if its investments are really making the business generate money.
See 4 tips on how to improve your corporate finance management
Now that the theory has been discussed, it’s time to learn some practical tips for better financial management . Check out everything below!
1 – Periodically evaluate profitability
It is necessary to always be monitoring the company’s profitability. This means that the responsible professional needs to periodically assess whether the services or products are profitable.
To do this, just divide the company’s profit (in a given period) by the value of the initial investment made in the enterprise. The percentage result is equivalent to profitability in the period established.
There are some indicators that make profitability assessment much easier and help in planning strategies. They are: asset indices, return on capital, margin indices and return on equity.
2 – Use an online financial management system
Being resistant to new technologies is a big mistake. Management software is especially effective, as it reduces bureaucracy and presents much more accurate and clear data, which makes decision-making even more assertive.
An integrated financial management system is able to record all the financial information of the enterprise in a single environment. With it, it is possible to better organize the financial indicators and data, as well as access it wherever and whenever you want.
The automation of financial operations, greater data security, agility in results, greater practicality, reduced likelihood of errors and easier access to information are just some of the main benefits of a tool like this.
3 – Do a tax planning
Having a good (or at least basic) knowledge of taxes is critical to managing corporate finance . By monitoring the main aspects involving taxes, it will be possible to create a tax plan that can reduce the tax impact on the company.
This also provides the organization with more security, an adequate fiscal framework, transparency and possible savings.
To do a good tax planning, it is necessary to organize it in stages. The first is to set a schedule for all activities. Then, collect information from the main calculation bases, such as billing, operating expenses, investments, purchases, etc.
Finally, one must analyze and simulate the scenarios, that is, evaluate all possible tax situations, taking into account points such as revenue, labor, profitability, etc.
4 – Have separate funds for each sector
Keeping separate funds for each sector is a good way to better control finances. Putting a specific budget for each area and letting each manager be responsible for their budget, expenses and accountability can organize and make management uncomplicated.
Not to mention that those with knowledge of the sector can make investments and even cuts in more specific aspects without affecting the quality of the products or services offered. This does not mean, however, that you will have no control over finances.
In fact, you will continue to do your work and follow up and manage at the macro level. The difference is that it will be possible to have a more comprehensive look, being able, from that, to find points of improvement and, when necessary, signal them to the managers of each sector.
Understanding the changes in the area, terms and technologies is already a big step towards good corporate finance management . Our tips can help you a lot within the company, but the ideal is to never stop looking for new knowledge.
