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How to improve financial management

Ana Canteli

Written by Ana Canteli on April 30, 2021

Any natural or legal person or business - knows that they are responsible for their finances. This means that you should know what resources you have to cover your needs and achieve your objectives in the short, medium, or long term. But when it comes to the financial management of your company, we are not only talking about an individual obligation, but also a responsibility with effects on people, the company, banks, public administrations, even in the sector in which it operates your business. And that's when we realize that being responsible for your company's financial health is a critical task that we shouldn't take lightly. Hence, it is logical that any company is interested in improving its financial management.

Elements of sound financial management

Treasury Management

  • Improve the money management: It is necessary to optimize the collection and payment operations for this. How? Analyzing the billing and collection processes, centralizing payments, etc.
  • Make medium and long-term cash forecasts: and update them frequently so that the personnel assigned to the treasury can trust the data on which they will be based to make decisions.
  • Minimize the portfolio of defaulting clients: it is necessary to detect those who are not reliable customers. Negotiate to obtain partial or fractional payments. Remind them of the payment and credit conditions, and try to keep them to a minimum.
    If one of these defaulting clients represents a large proportion of the balance sheets, maintaining a relationship with them can cause severe imbalances in the company's financial resources.

Bank management

  • Simplify operations with financial entities: reduce the number of banking entities and the number and type of accounts with which your company operates.
  • Negotiate the conditions of banking services: the ideal would be to gather and maintain our financial profile, bargain volumes, and fees, and audit them periodically to verify those agreements are fulfilled.

Financial management

  • Research, compare the different market alternatives. Compare the available options and study other sources of financing to optimize your financial management, always looking for the lowest possible cost.
  • Control of financial risk: in principle, it is advisable to use external sources of financing only if necessary, but on the other hand, we should not rule out the benefits that they can bring us, such as financing in currencies other than the usual currency for the company. It is also essential to diversify risk to boost the firm's financial health when possible.
  • Emergency fund: sensible financial management implies finding a balance between profitability and risk. Emergency fund depends on the size of the company, and the sector in which it operates, among other aspects. But in general, it is recommended to have a fund equivalent to three months of operation

Personnel management

Given the increasing complexity of financial and economic instruments, it is vital to consider whether human resources have the necessary management skills.

The ideal would be to have a CFO capable of adapting to difficult situations by proposing solutions in which creativity plays an increasingly important role. It is their responsibility to manage the global business plan supported by a team prepared to respond to the needs and challenges. It is also advisable to centralize treasury decisions, appointing a treasury manager.

Keys to improving financial management

  • Take advantage of new technologies. Take full advantage of the latest technologies that the company relies on. In this sense, to create a good financial system, it is vitally important to choose a good financial management software with the ability to integrate with third-party applications. The OpenKM document management system with its complete API and extensive documentation offers all the necessary resources to complete and extend the information management system in your company. SDK's in Java, PHP, .NET, and the development of modules that offer solutions ad-hoc and the growing presence of new satellite applications greatly facilitate the development of all activities from a single platform. Helping the organization to progressively, efficiently, and effectively implement and digitize business processes. For example, thanks to the Invoice Reception Module , the treasury department can consider the digitization of the process, the centralization of collections and payments, and the reduction of deadlines.
  • Establishment of plans and calendars: OpenKM of functionalities such as the task manager, reports, subscription service, automation, workflows, zonal OCR, etc. Allows your company to develop and implement the directive plans in a transparent way that guarantees the collaboration of the personnel and the real-time control of all the activity indicators. The OpenKM financial management software has a complete audit that allows you to follow the traceability of any event that occurs in the system. When a payment or collection occurs, the financial management system can send a notification to those responsible. And if it is necessary to propose a change, these initiatives will be corrected based on the information collected by the system.
  • Know the cost of the financial structure: How much do we have and owe? How much does it cost me to produce what I sell? What is my profit margin? Do I have credit policies? Long-term loans? Good financial management software has to provide all the necessary information so that warehouse managers, commercial department, treasury, etc., know what cost and the consequences of their decisions at a financial level. This contributes to the financing of the assets that the company needs in a consistent and predictable way, the adequate administration of the cash flow, the reduction of the risk of losses, or tax burdens, among other financial goals.

What are the benefits of improving financial management?

  • Effective management of the company's assets: we could say that financial management is a multidisciplinary task since the decisions made in this area affect the entire organization. Therefore, being clear about the key elements of better financial management, we can be sure that the company maximizes the profit of all its assets.
  • Improve the investment portfolio: if we have a surplus, the company can consider investing these resources in very different ways. From considering reinvestment in the company (training courses, acquisition of capital goods, renovation projects, new facilities) to diversifying the portfolio, if any.
  • Establishment of plans: thanks to good financial management, the company can consider and even publish expansion and development strategies based on the reliability of the data managed by the organization.
  • Optimize decision-making: as a result of the quality of the financial management system developed by the company, financial managers can be sure that they are making tactical and operational decisions based on up-to-date, accurate information.
  • Satisfy the needs of stakeholders: Good financial management benefits everyone involved. Clients have the peace of mind of working with a reliable supplier in the long term, and employees can also make career plans in the organization.
  • Distribute dividends: the positive effects of improving financial management must reach all of our employees, and that includes compensating shareholders for the risk they have assumed.

Don't wait any longer to find out how OpenKM can contribute to improving the financial documents management of your company.

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