How to Manage the Company Finances

cash flowIt is necessary for all businesses to manage their finances. In small and medium businesses the owners are involved in this process but depend on expert advice of a qualified accountant whenever they need guidance. In large companies, the sheer volume of financial transactions, money outlays and quite often shareholder interests, requires that financial management is carried out by a dedicated team of professionals who are entrusted with the work.

Corporate finance management refers to the management of the financial resources of a company, and its primary aim is to maximize the value of the enterprise. This exercise requires the proper allocation of financial resources that takes all risks into account. The professionals entrusted with this task in big business will analyze any problems that are perceived in the finances of the company and come up with solutions that are universally accepted and keep within the framework of all laws.

Finance managers of large firms have to look constantly at capital management, the management of inventory, managing of debtors, setting up policies on dividends and profit sharing, and other matters that deal with risk management, and the long term and short term financing needed by the company for its running. Each of these tasks is entrusted in large firms to different professionals who will be specialized in their field. They will use various financial tools to distribute the available finance to the different sections of the company while judging the ones that present the best opportunities to make the maximum use of the fund thus availed.

Finance management has always been important for all business enterprises, and it is all the more important for large companies because the results of poor handling of finance can be far more disastrous. Larger companies also have a greater number of stakeholders in the form of shareholders, who will always be expecting the company to maximize its profit. Directors and company boards also look to finance departments in their organizations to present them with timely and accurate financial reports. They will insist that their finance departments include comparisons with previous periods so that the consistency or improvement in performance can be noted. They will expect all anomalies to be explanatory and logical. They will expect the finance department to keep a control on all recurring expenses. Information needs to be constantly available to managements on daily cash balances, accounts receivable collections, and any unusual transactions. Cash requirements for the future operations require to be correctly forecast, and the means of meeting them clearly established, or arrangements made where necessary.

The vital areas of any company finance are book keeping, cash flow management, payroll and invoicing that brings in the revenue. Bigger companies will have separate departments for all these functions, but with common reporting that allows all information to be collated and an overall picture of the financial health of the company to be always available to both finance managers and other management. This action becomes easier with the use of computers and information technology. The use of this modern device can enable all information available to senior management to be on a real time basis that allows better decision making.