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How to set goals in financial management - and achieve them

Goals in financial management

Streamline your finances with Numarics' AI-powered solution

In 1999, Marvel Entertainment was on the brink of bankruptcy, and its stock price was a miserable 0.94 cents a share. Sales were flat and the company was burdened with $250 million in debt. In this dark hour, however, it was not a superhero who saved the company - but clever financial management.

It's no secret that Marvel managed to save itself and go on to produce some of the most successful films of all time. And of course, not every company will be as strong in sales as Marvel is. But we can all learn from Marvel's strategy for success.

Why does my company need financial management at all?

A company's success requires strategic planning, whether it's to turn around a sinking ship or to boost the growth of an already profitable business. To make the best use of what are often scarce resources, finance departments must be methodical in setting financial management goals. By setting clear targets for maximizing profits, cash flow and minimizing costs, the finance team ensures that the company is always financially sound and able to make informed business decisions.

This is how successful financial management works

The companies that succeed aren't the ones that hit a golden opportunity or just get lucky. No, it's much more those who follow a precisely planned financial strategy. That's how it works.

1) Set up a financial plan

Clearly defining goals, setting deadlines and determining the available resources - these are the be-all and end-all of a well thought-out and structured financial plan. Market research is also important to find out what goals are realistic. Finally, you should assess your willingness to take risks and know the pros and cons of all possible decisions.

For Marvel, this has meant being honest with themselves and recognizing the limitations their limited budget has set them. This meant they couldn't start making their own films and instead decided to license their characters to multiple studios. This spread risk and maximized IP reach while keeping costs low.

2) Define the budget

A budget can be used to determine what resources are required to complete a project. It provides insight into the funding required for recruitment, development and other purposes. It should also include the fixed, variable and semi-variable costs, the sales and revenues required for the various projects, and an estimate of the expected profit.

3) Manage cash flow

A good understanding of cash flow is critical to planning, forecasting, raising capital and making strategic decisions. Here are some key ways businesses can better manage their cash flow:

Automated bank reconciliations:

With bank reconciliation, transactions are reconciled with the bank statement. If this is done manually, errors can occur, especially with a large number of transactions. Automation can quickly identify errors that could negatively impact cash flow. For example, a supplier might have invoiced a double amount. Incidentally, Numarics uses state-of-the-art AI technology to automate repetitive bank reconciliations.

Analyze margins:

Financial management is all about increasing efficiency. By analyzing its profit margins, the company can uncover and eliminate inefficiencies in its operations. If cash is being spent on unnecessary expenses (e.g. software subscriptions that aren't being used) or if the cost of sales is higher than expected, adjustments should be made.

Manage Liquidity:

How well is the company able to pay its long-term debt (solvency) and short-term debt (liquidity)? It may be necessary to increase sales, increase equity or sell assets in order to remain solvent. When staying liquid is difficult, assets may need to be leased instead of purchased, accounts receivable need to be analyzed to ensure they are paid quickly enough, invoicing needs to be automated, and suppliers need to wait longer before getting paid.

4) Test and optimize

There are a million things that can affect the financial plan: Management can change, investors can have new ideas, and customers can drop out or join. Every plan faces challenges, and it comes down to how you respond and adapt.

Improve accounting

With good accounting, it is much easier to achieve financial management goals. When the books are out of order, the whole company is disorganized and projects move slowly. Poor financial accounting, improper reconciliations and a disorganized chart of accounts are particularly problematic for many companies.

Numarics is the competent partner for all questions relating to fiduciary and accounting.

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