Why Financial Management is important and why it is needed in the company?

13 2018

In our consulting activities we very often face the situation when the Company Head who (he or she) created the company and which starts growing rapidly begins to experience great difficulties with the financial accounting as well as difficulties with the analysis of company's financial resources.
Due to very heavy workload and lack of time the company managing director sometimes loses a control over the financial incomes and even worse he/she cannot track the effectiveness of spending financial means. As a result, the moment comes when he starts asking questions: “How efficiently the funds are spent?” “What is the level of profitability?” “Did the company achieve the financial sustainability?” 
Moreover, at the mention of such words as accounting and financial management everything inside of Managing Director freezes but the inner voice begins to whisper to him that it is good at least to start to understand finances in a such way as he knows how to communicate with people, knows the entire range of products and all types of services of his company. “But finance – it is so complicated! It's boring and, maybe, it’s even scary!” To some extent your inner voice does not deceive you because:
  1. If you know how the finances of your company are organized and if you can analyze their status according to the financial statements, then this indicates the level of your qualification and it increases your value as a manager and employee of the company accordingly;
  2. Understanding the issues of financial management, you will be able to:

  • Effectively manage the finances and all assets of the company (buildings, vehicles, equipment, inventories, etc.)
  • Reduce transaction costs and monitor profitability,
  • Create a flexible pricing policy,
  • Increase profits and thereby to increase the company's solvency and liquidity,
  • Ensure the financial stability in the long term and to avoid major financial setbacks,
  • Strengthen the company's positions in the market or to expand the existing market segment,
  • Increase the market value of the company itself. To ensure the investment attractiveness, etc.

  3. You will manage the company better if you understand what impact will be on the financial condition of the company upon each of your managerial decisions.
Learning the basics of accounting and financial management is not only useful but it also is necessary since you, as a Head of Company, directly manage all aspects of the company's activities and are looking for a way to achieve the ultimate goal of financial management - to get the maximum financial benefit from the company's activities. So, all decisions made by you directly affect on your welfare in the future.

As an example, one of our clients "Daiyr Auto" Service Center providing auto/vehicles repair services experienced difficulties with financial accounting, analysis of its financial and economic activities. Therefore, the Head of this company applied to us for a consulting assistance.
During the period from May 17 to July 30, 2018, two experts of ECA Consultancy (financial management consultant and financial accounting consultant) provided a number of training and implementation service activities which included the following types of work:
  1. Diagnostics of financial and business activities (based on available financial management statements):

  • Analysis of financial condition (analysis of financial stability, cash flows, demand for working capital, debt obligations),
  • Analysis of the cost of production and services,
  • Analysis of sales of products and services,
  • Analysis of property status.

  2. Formation of management reporting system and matrix on pricing;
  3. Diagnostics of accounting transactions and the existing automated system. Analysis of accounting principles in the company;
  4. Development of the Accounting Policy;
  5. Conducting interactive training / coaching on the introduction of accounting and the basics of financial management with using automated systems;
  6. Installation of the automated system "1C: Accounting" and AS " Management of Trade";
  7. Implementation of the principles of financial management.

The trainings and implementation activities aroused great interest from the side of Head of the Company and its employees as well. In the course of implementation work the presentations, interactive case studies and analysis of the main financial reports as well as analysis of the actual sales of this company were presented. Many questions were asked by designated employees and they received practical answers how to analyze and use the data, what tools and methods should be used during the analysis, how to work in accounting automated system, what documents and reports should be produced and etc.
Financial Manager and Head of the "Daiyr Auto" Service Center remained very satisfied with the services of ECA Consultancy. At the moment within one month the on-line consultations are being held for the client.