As a small business owner, you wear a lot of hats. You’re responsible for everything from marketing to looking after employees, of course, financial management.
But what exactly does financial management entail? And how is it different from bookkeeping?
What does Financial Management mean?
Put simply, Financial management is the process of planning, organising, and controlling a company’s financial resources.
Financial management refers to the strategic decisions you make about how to allocate your company’s financial resources. This includes everything from setting financial goals and developing budgets to making long-term investments and assessing risks. In short, it is all about making sound decisions that will help your business grow and prosper.
In other words, it’s the big-picture view of a company’s finances. This includes developing financial goals and objectives, as well as creating and implementing strategies to achieve them.
How can it benefit my business?
One way that proper financial management can benefit a business is by helping to ensure that the company has enough cash flow to cover its expenses. Financial management can help businesses make smart investments and keep tabs on their spending, which can help them stay afloat during difficult times. In addition, done correctly, it can help businesses make more informed decisions about where to allocate their resources, which can lead to increased profits in the long run.
How can it help you achieve business goals?
Financial management can help you achieve business goals in a number of ways. First, by developing a clear financial plan, you can ensure that your company is making the best use of its resources.
This includes setting financial goals and objectives and creating budgets to track progress. Second, it can can help you make informed decisions about where to allocate your resources. This includes making decisions about investments, loans, and lines of credit.
Finally, it can help you assess risks and make plans to mitigate them. By understanding the potential financial risks your business faces, you can be better prepared to deal with them if they arise.
What does Bookkeeping mean?
Bookkeeping, on the other hand, is the process of recording, classifying, and summarising a company’s financial transactions. This includes sales, purchases, receipts, and payments.
Essentially, bookkeeping is the nuts-and-bolts work of keeping track of a company’s finances on a day-to-day basis. While financial management focuses on making long-term decisions about how to best use a company’s money, bookkeeping focuses on the here and now—making sure that all of the financial transactions are accounted for.
While bookkeeping is an important part of managing your finances, it’s only one piece of the puzzle. To make sound financial decisions, you need to understand both the big picture (financial management) and the details (bookkeeping).
Should my business be doing both?
Quick answer… YES!
Financial management and bookkeeping are two essential—but distinctly different—aspects of running a successful business. Financial management involves developing goals and strategies for using a company’s financial resources to achieve its overall objectives.
Having someone assist you with financial planning and bookkeeping is a great way to ensure that your business is on track and making sound financial decisions. If you’re not sure where to start, consider enlisting the help of a professional accountant.
With proper financial management and bookkeeping in place, you can rest assured that your business is on solid footing—and poised for success.
If you need help with any aspect of your business finances the team here at Stones Accountancy can help. We have years of experience helping small businesses with everything from bookkeeping to tax planning.
Contact us today to learn more about how we can help your business!