Finance management is an important skill for all businesses. The first step in any management approach is understanding how the business functions and what the finances are. Knowing your finances is key to successfully operating your business, and the CFO will help you do that.
The finance department will be responsible for forecasting cash flows and estimating the value of investments, certain business circumstances can make those estimates inaccurate. When forecasting accuracy is poor, that can result in mismanagement of resources. This will also lead to inefficiencies and loss of customers. The finance department will need to ensure these facts are accounted for as well as provide accurate accounts of cash transactions.
Financial data is available in various forms including spreadsheets, electronic invoices, and on-screen charts. Using these means it becomes easier to figure out exactly how your money is being spent and what can be done to improve the profits.
The finance department will be responsible for setting up a budget for the company. The budget will be kept within or above the company’s cash flow requirements. Once the budget is set, the finance department will be in charge of planning how to spend the company’s money.
As the company grows so do the needs of the business. The finance department must stay current with these changes and provide a regular update to the management on how the company is performing financially. The manager should be informed on a quarterly, monthly, or even daily basis as to how the company is doing. The CFO will be in charge of making sure these budget changes are properly made.
Financial statements are generated from the accounting department of the company. This is a necessary tool in order to calculate a true picture of how well the company is doing. It’s also a tool that will provide the management with the numbers that they need to make decisions.
The profit statement is where the actual cash flow is measured. The management will use the profit to determine how the company will be spending its money. The profit is a direct reflection of the amount of money available to the business. It will show if the cash flow has been sustainable and if the company has been able to stay profitable.
Cash flow is the smallest part of the financial statements. Cash flows will provide a snapshot of what cash will be coming in over a given period of time. They will also give the management information on the actual dollar amounts coming in and going out.
The depreciation expenses and the amortization expenses are part of what can be expensive aspects of a company. Defects and repairs require cash upfront which will cost the company money in the long run. When these are included in the financial statements, it will show how much money the company is actually spending on these costs.
Revenue statements are similar to income statements but are usually done in three parts. Revenue is the money that the company receives from customers, this is the number of customers the company has, but the money goes much farther than just one customer. The revenue will show how many customers are being brought in each month as well as how much money is being spent.
These are three important aspects of the financial side of a business. They include the balance sheet, the cash flow statements, and the profit and loss statements. These are critical components of any business, but the finance manager plays a large role in keeping the business running smoothly.
