Financial Management Is a process of managing financial resources, including accounting and financial statements, creating budgets, collecting receipts, risk management and business insurance.
Within the company, financial arrangements are often called financial management. These activities typically include planning, operation, analysis of financial activities, as well as control, and financial control. Broadly speaking, financial management is all activities related to how to obtain working capital funding, how to use or allocate funds, and manage assets owned to achieve the main objectives.
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Financial management system
For a small business includes how we manage the flow of finances and how to manage finances in the business. What about the financial management of your business?
The first thing to do when creating business finance rules or arrangements is whether we will organize them ourselves or hand over their stewardship to others? Whether your arrangement is correct or not you can consult with those who are more knowledgeable about financial management. Financial problems in this business do have many alternatives to do if you are not familiar or have no financial management background. We can just set it up ourselves, hire clerks as assistants, keep own reports but hire a special accountant for tax management.
Or it could also have an external financial report book that manages financial transactions but has an accountant to handle formal reporting functions. There are several accounting firms that provide accounting services of financial statements. You can also download software to create reports and accounting itself from the internet.
The financial book contains daily operational activities and keeps regular transactions within the appropriate accounts. Keeping your business's financial management in good working requires a serious effort to make the flow of business finance work. Designing an accounting system, collecting receipts and receipts, paying employees, paying suppliers and paying taxes properly are activities in a business finance.
Designing financial management
Which we need with minimum maintenance can make small businesses more fun and save us from problems that may arise in the future. So, basically the accounting system comes from a good financial system. What is the difference between a financial system and an accounting system?
Accounting is an overview of the ongoing business processes including income, expenses, assets, accounts payable or an organizational system that serves to track the flow of money in our business, tracking where the money should flow. While the financial system is a system that keeps the real transactions in place. So both of these things must exist and run well on the financial management of your business.
Principles of Financial Management
In practice, financial management is an action taken in order to maintain the financial stability of the company. Implementing financial management is not an easy thing, it takes principles that can underlie financial management. Here are 7 principles of financial management that need attention.
1. Accountability
Accountability is a moral or legal obligation inherent in an individual, group, or company to mention how funds, tools, or powers granted by a third party, whether the funds have been used and used? And used for what? Companies should be able to mention how they use their funds and what they have accomplished as accountability to interested people and beneficiaries. All interested parties have the right to know how funds and authority are used.
2. Consistency
The financial systems and policies of the organization must be consistent over time. This does not mean that the financial system should not be adjusted if there is a change in the organization. An inconsistent approach to financial management is a sign that there is manipulation in financial management.
3. Survival (Viability)
In order for the finances to be maintained, the organization's expenditure at the strategic to operational level must be in line with or adjusted to the funds received. Viability is a measure of the level of security and financial sustainability of an organization. The organizational manager must prepare a financial plan that shows how the organization can execute its strategy and meet its financial needs.
4. Transparency
The company should be open about its work, providing information related to its plans and activities to the interested parties. This includes preparing an accurate, complete, and timely financial report, and is easily accessible to interested management and beneficiaries. If the company is not transparent, it indicates that something is hidden.
5. Accounting Standards
The accounting and financial systems used by the company must conform to the accounting principles and standards applicable in Indonesia. This means that every accountant in the world can agree on and understand the system used.
6. Integrity
In carrying out its operational activities, the individuals involved must have good integrity. In addition, financial reports and records must also be maintained for integrity through the completeness and accuracy of financial records.
7. Management (Stewardship)
Companies should be able to manage and use the funds that have been obtained properly and ensure that the funds are used to achieve the goals set by the company.
Business will be great with good financial management so we know whether our business is losing or profitable, whether our profit is small or large, whether we are able to do business expansion or temporary enough, whether our business is healthy or has entered the category of bankruptcy, all can be seen on sound business finance management. So start your business by doing business financial management properly.