By Simon Bittlestone, Head of Commercial Development, Metapraxis
If there's one thing that small businesses learned in the credit crunch, it's that good financial management is essential to running a successful business. Unable to rely on previously free-flowing sources of credit, SMEs (Small and Medium Enterprises), like consumers, have had to relearn some skills that were perhaps forgotten during the heady boom years - austerity, cash and capital are the new watchwords.
Against this backdrop, financial management has taken a central role in the overall management of SMEs. But there is room for all staff to do more, and to understand more about the relationship between financial management and business success.
It is rare that an entrepreneur possesses all of the necessary skills required for efficient financial management; and the industry does not help smaller firms. Much of the literature available is targeted at larger companies which, in general, employ accountants or are managed by directors who have previous experience in accounting. SME owner-managers don't need theories, they will benefit more from practical ideas for coping with the current hostile economic environment, and opportunities to exchange views with others within their sector.
In our own course, Financial Management for Business, we recognise that time is precious and that people do not learn best from reading long winded literature. Our aim is to deliver a more intuitive understanding of business finance for owner-managers and their staff, which we achieve through the use of online interactive simulation models. We focus on helping people to understand the basic rules of accounting, to master the terminology in financial statements, to understand the inter-relationships between profits, cash flow and the balance sheet and to recognise the difference between reporting profits and generating cashflow.
Then we look at how we can improve commercial judgement, by understanding the key financial decisions needed to launch a new business and optimise factors such as pricing, quality and marketing spend in a competitive environment. Successful participants even get a certificate from the Chartered Management of Accountants as testament to the skills they have developed. Financial management is not something that should be left to the accountants nor should it be the sole responsibility of the SME owner-manager. Everyone in business should understand the key principles of good financial management and now everyone can. Once people intuitively understand the inter-relationship between financial management and day-to-day commercial decision-making, they are able to anticipate risks much more effectively, plan for the future and - most importantly - sleep better at night!
Source: Rostrum Communications www.rostrumpr.com
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