Regardless of whether you are starting or running a business, finance plays an essential role in it. You need a sufficient corpus of funds and proper financial management throughout your business lifetime for the smooth functioning of the company.
From buying new machinery and hiring staff and giving them salaries to paying government taxes, you need funds everywhere. But managing your cash flows, accounts payable and receivable, taxes, etc., can be difficult without a qualified accountant.
This blog post shares the roles and responsibilities of an accountant in your financial management.
Table of contents
- What is financial management?
- What are the goals of financial management?
- The role of a qualified accountant in financial management
Financial management refers to controlling your money flow in and out of the business. You must sell goods or services, cover expenses, keep accurate accounting records, and file taxes within deadlines.
All of this comes under the roof of financial management, along with paying employees, purchasing supplies, etc. Hiring an accountant is the best option if you aren’t an expert in it.
Now, the question is, how can an accountant help a company to grow? These professionals have the skills and expertise in efficiently planning, organising, and controlling your business transactions.
They help you gain capital from every source possible, including initial entrepreneur investment, debt financing, venture capital, etc.
Additionally, these experts are responsible for fund allocation in an organised way that ensures better financial stability and organisational growth.
The goals of financial management in business include
- Keeping your company solvent by ensuring proper cash flow and sufficient cash reserve to continue operations.
- Maximising business profitability by selling profitable goods and services and discontinuing the ones making the losses.
- Reducing unnecessary expenses by regularly monitoring your cash flow and spending patterns and finding ways to eliminate overhead costs.
- Improving your business return on investment by attracting more investors.
- Forecasting capital requirements to ensure your company has enough cash to function as well as for business growth.
- Eliminate financial risks and evaluate fines by ensuring your company complies with the regulations.
A qualified accountant has the skills and expert knowledge of financial management techniques, which can help your business organise funds efficiently.
Listed below are some of their roles in business financial management
● Capital rationing
A qualified accountant can assist in analysing and optimising the cash flow of your business by estimating capital needs in the company beforehand.
This means they can forecast your expected expenses, future profits or losses, etc.
They can decide if there are mutually exclusive projects and which one to pick purely based on numbers.
● Deciding on capital structure
They don’t stop at forecasting your capital needs but help you create a capital structure that includes managing debt and, capital signature, and equity management.
The capital structure of your business usually conveys a debt-to-equity ratio that is useful for a company’s operations, investments, acquisitions, and growth.
● Working capital management
The financial accountants are highly trained in managing business funds. They closely monitor the business’s daily operations and ensure you have sufficient cash to handle each expense properly. This includes paying your employees correctly and buying raw materials.
Working capital refers to the cash-on-hand, inventory-on-hand, and other business assets that you can sell quickly to raise money during emergencies.
● Revenue cycle management
One of the main roles of a financial accountant is to keep track of your revenue. Revenue refers to the funds you earn by selling goods and services over a period of time.
However, when you move towards selling everything “as a service”, your revenue will be calculated monthly or quarterly in which it is earned and not together at the time of the sale. An expert ensures better execution of your revenue cycle management than you could do.
● Assisting with dividend decisions
Dividends are a part of the profit you offer to all the shareholders of your company. However, the difficulties lie in determining the right amount of dividends as shareholders will always ask for more and companies want to retain more profits for business requirements.
Only a CFO can help you deal with such complex managerial decisions, which not only keep sufficient funds for your business but also distribute dividends among shareholders properly.
● Creation of effective financial policies
To Implement cost control measures, you need efficient financial policies that an accountant can create. These policies help govern business cash flow, lendings and borrowings, etc., to assist you in managing finances smoothly.
● Capital Budgeting
An expert financial accountant can navigate your different business scenarios using the available financial resources. This includes meeting your rents and mortgages, salaries, raw material purchases, employee training, and all other obligations.
Additionally, they also set a budget for emergencies and to fund business growth. These accountants help in creating a master budget for your company that covers all your business expenses and manages your finances efficiently.
● Managing and assessing risk
Every business can encounter risks at any time, and you must stay prepared for them beforehand.
A financial accountant can help assess various risks and provide compensating controls against them. Some of the prevalent risks include market, credit, liquidity, and operational risk.
For example, your customer not paying their bills on time may leave you in a financial crisis while meeting your obligations. This can impact your creditworthiness and business valuation, affecting your ability to borrow or take a loan at favourable rates.
Accountants can identify all your financial risks and help you find immediate solutions to tackle them.
● Complying with regulations
This is the major task of an accountant, as every business must comply with the standard rules and regulations in the UK. Otherwise, you may encounter unnecessary penalties or fines and shutting down business at the worst.
Therefore, you can hire an expert accountant who knows the nation’s regulations at every level and ensure you stay compliant with the law.
Most of the businesses effective in managing their finances experience exponential growth; otherwise, you may undergo losses or make lower profits.
Therefore, it is essential to hire an expert accountant for your financial management and make sure you aren’t putting your business in danger.