Corporate Finance: 6 Key Steps for Business Financial Management

 6 Key Steps for Business Financial Management

Corporate Finance: 6 Key Steps for Business Financial Management

There are many products available in the market and companies with the potential to be much larger than they currently are, yet for some reason, they don't make progress.

You’ve probably heard countless times that money shouldn't be the sole goal of a business, and while that's true, it's also essential to understand that without money, no company can sustain its operations.

1. First Step: Separation

The first step to good business management is straightforward but needs constant emphasis: separate your business finances from your personal money. You can withdraw part of the profits when necessary, but don't pay yourself too high or too low a salary. You need to receive a market-competitive amount for your role in the company. This practice will simplify things when your business grows.

2. Second Step: Record Keeping

The second step is to record everything. Every inflow and outflow of money needs to be controlled. If your business still has few transactions, this can be done in a notebook, a financial control spreadsheet, or even an app.

3. Third Step: Analysis

After getting into the habit of recording transactions, you also need to analyze costs and revenues and cut unnecessary expenses. For instance, if your phone bill has increased by 50% from the initial cost, it might be time to negotiate a lower rate or look for alternatives. Small savings can make a significant difference to your company's bottom line at the end of the month.

Remember the first step: if your business and personal finances were mixed, how could you identify the problem? This is when you start having real data to analyze and identify growth opportunities, allowing you to make informed decisions.

4. Fourth Step: Sales Analysis

Analyze how much money your company receives, including the percentage of sales made through credit cards. For example, anticipating $5,000 in sales via credit card might cost your company more than $500 if the fee is around 10%. This means you end up receiving only $4,500.

I'm not saying you should eliminate credit card payments, but offering a discount for cash payments can sometimes be advantageous for your company and the customer. If you must pass on the transaction fee, add it to your sale price rather than absorbing it from your profit. Cash in hand always helps with cash flow.

5. Fifth Step: Investment

Invest in your business, as well-invested money can generate more revenue, making your business even more profitable. 

Large companies do this with a significant portion of their earnings. If you want to grow, think like a large company: improve your infrastructure, expand your space, hire more staff, and offer more services. Identify bottlenecks in your processes and invest in resolving them.

To do this, you need to outline your sales process from when a person shows interest to the closing of the sale.

6. Sixth Step: Promotion

Next, look for gaps in your process to find solutions. Problems could range from poor public advertising at the top of the funnel to unqualified sales staff at the bottom, or even issues with the store location or unwelcoming environment in the middle of the funnel. 

If you don't identify any immediate points for optimization, consider medium- and long-term strategies.

A good idea is to create branded merchandise like mugs or t-shirts to give as gifts to your best customers. Avoid common items like pens, fridge magnets, or calendars.

This type of investment should only be made after applying all the previous steps. Otherwise, you're just fooling yourself. Remember, the goal is not only direct sales conversions but also long-term customer loyalty and word-of-mouth marketing, gradually building a strong brand.

These are the tips I have for you. I hope they are useful and that you truly apply them to your business. This is a more comprehensive content piece we’re sharing for the first time, so if you liked it, please leave a comment below.