Why is it important to effectively succeed in a company’s finances

The evolution and growth of a company are determined the management that is carried out. And a vital aspect is control of money. A scale used to calculate the success of a company is the economic benefit. This is where the importance of managing a company’s finances efficiently and analyzing whether this management causes the maximum possible benefit from commercial activity lies.

An integral part of the business structure

must consider financing an essential part of the business structure since it directly impacts all relevant aspects. Still, it must use as a tool that makes possible the viability and achievement of the objectives. Previously established goals of the company. Healthy finances contribute to the ability to execute. Also the optimal functioning of business activities such as marketing and commercial actions, operational processes. The purchase of supplies or investments in infrastructure, to name a few.

Therefore, as businessmen and entrepreneurs, we must pay attention to this area and recognize the importance of effective and efficient management of the company’s finances. This management must be carried out daily due to its reputation in the organization’s survival and decision making. The growth of a business is not possible, for example, if the debts and the investment to be made are not financially managed correctly and promptly.

The benefit

As we have already seen, the global vision of this management leads us to take measures that affect the different areas that make up a company. These measures are necessary for the company’s proper functioning since finances intervene in all areas of the organization and are the protagonists when you want to carry out an investment, purchase or payment process. In other words, they have a direct impact on maintaining the company’s good health.

To find out if a company is in good health, it is necessary to look at a key indicator: profit. It is essential to learn how to calculate a company’s profit to design any future business strategy with minimum guarantees. It is also necessary to obtain this information and verify that there are no losses to make decisions that promote the company’s growth.

Basic concepts in financial management

Contribution margin

It is the difference between the total sales in a specific time and the cost of the products or services that sold. Another way to calculate it by-product sold. That is, subtracting the purchase cost or the variable costs of producing said product or service from the sale price of a product or service. Therefore, the margin indicates the gross profit of the economic activity. In its calculation, we do not consider the fixed expenses of the business activity, such as electricity costs, taxes, salaries, rents, etc.

Breakeven

It consists of the profitability threshold; that is, the minimum sales level that a company needs to equal the total expenses incurred in a given time to the total sales income. Both fixed and variable expenses involves in calculating the breakeven point. As soon as the fixed costs of the commercial activity of the business covered, it will begin to obtain profits. This concept is essential to know the necessary minimum of sales to be able to get benefits. To have precise control of the company’s financial health.

Income Statement

This financial management instrument, also called the Profit and Loss Account collects. The income and expenses that a company has had in a certain period. It indicates how sales revenue transforms into profit or loss as variable costs, fixed fees, financial expenses, taxes, depreciation, etc., are subtracted. An income statement is an essential tool in the financial management of a company. As it allows payments to analyze and, to know how the profit or loss has to generated.

The Balance Sheet

It is an accounting document that indicates a company’s economic and financial situation at a specific time or date of the company’s assets, rights, and obligations. Any fact recorded in accounting could perfectly transferred. The Balance Sheet to reflect the resources that exist in the company. Utilizing a specific structure, the assets, liabilities and net worth of the company reflects. This instrument is essential to analyze the situation of a business project and facilitate understanding. The good or bad development of the company.

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