Practical tips for improving financial management in small and medium-sized enterprises

In our current time, many small and medium companies face numerous challenges, including financial challenges that require careful study of many aspects. In this article, we will present the importance of financial management and the most important steps to improve it.

Concept of Corporate Financial Management

It is considered one of the main foundations for all companies, whether small or large. It involves determining plans that organize financial resources, determine and control expenses. This may help companies ensure their stability and continuity for long periods and enable them to compete.

Principles of Corporate Financial Management

Financial management helps companies balance investment risks and their returns without exposure to any loss.
Successful financial management must establish plans for various financial activities within the company.
Financial management ensures liquidity that covers all short-term obligations while focusing on profits and generating long-term returns.
Financial management ensures compliance with legal standards, which increases company transparency and trust in it.

Importance of Corporate Financial Management

Corporate financial management in general, whether small or large, is the foundation that determines the success or failure of these companies. Its importance lies in the following:

Establishes realistic, applicable, and achievable financial plans.
Assists in making guaranteed and successful financial investment decisions.
Works on allocating and distributing funds to resources according to priority levels.
Helps company growth and market resilience while increasing investment in many other successful projects.
Establishes financial plans that include tax planning and allocate specific financial expenses for it.

Steps to Improve Budget Management in Small Companies

Small companies must focus on improving budget management to help their growth and continuity for long periods, enhance efficiency within the company, and achieve market resilience. To improve budget management, a set of steps must be applied:

Analyze expenses and identify fixed and variable ones, determine expected future revenues, and allocate some expenses at a percentage covering unexpected problems.
Monthly budgets must be monitored periodically, and some accounting tools can be used to obtain accurate reports.
Focus on fixed expenses and attempt to reduce them without affecting the quality of service provided to customers. Routine processes can be automated to reduce costs and ensure efficiency.
Improve cash flow by encouraging customers to pay early, and maintain some reserve funds to cover company expenses for at least 6 months.
A financial employee or accountant capable of intelligent financial management must be appointed.
Use modern and advanced methods that reduce company expenses and assist in its development and growth.

Accounting Tools That Small Companies Should Use

Small companies may need some tools and programs used to facilitate financial analysis and establish successful strategic plans that help accelerate their growth. The most important of these tools include:

Accounting software such as QuickBooks, Zoho Books, and Xero.
Financial analysis software such as Google Analytics and Power BI.
Cash flow management software such as Float and Live Plan.
Financial modeling software such as Anaplan.
Customer relationship management software such as HubSpot and Salesforce.

Best Financial Planning Strategies for Small Companies

Financial planning is considered one of the most important procedures that small companies should focus on to increase their stability and accelerate their growth in the business market. Therefore, some successful strategies must be used for guaranteed financial planning for small companies, including:

Defining Financial Goals: When starting to establish a small company, financial goals must be realistic and determine the appropriate time frame to achieve them. Some financial modeling programs can be used to define these goals and their achievement percentage.

Setting a Specific Budget: A clear financial budget must be established that includes all costs, whether fixed or variable, and identify areas that can be eliminated or their costs reduced. It must be continuously reviewed and modified according to company performance.

Monitoring Cash Flow: All funds entering and leaving the company must be monitored periodically, and expected and potential future expenses must be identified to provide some funds to cover them when they appear.

Identifying Expected Risks: Identify all financial risks the company may face, whether internal such as organizational changes or external such as changes in market requirements. Therefore, a plan must be established in case of exposure to such problems and rely on multiple financial sources that can cover company costs.

Utilizing Tax Opportunities: A tax expert must be relied upon to identify available tax opportunities and exploit them for company benefit, especially deductions and exemptions allocated for small companies.

Consulting a Financial Accountant: Realistic, applicable plans must be determined through market analysis, which can be done by consulting an expert accountant.

Using Financial Technology: Modern technology specific to financial analysis and establishing financial administrative plans must be utilized, helping make correct company decisions. These tools include accounting software such as QuickBooks and Xero.