Practical Financial Management Strategies for MSMEs
Getting a big profit every month would be one of the biggest dreams for every businessman. Because in running a business, money is the cutting edge. Therefore, wise management of money becomes very important for business continuity. If money is not carefully regulated, then income and expenditure will be confused. For those of you who are running a business, make sure you have the right strategy and financial management. This article will discuss financial management for MSME businesses.
MSME Business Financial Management
Financial management is a process in managing financial activities or activities in a business. Including planning, analysis, and control of financial activities.
In addition, financial management can also be interpreted as all activities or business activities related to efforts to obtain corporate funds by minimizing costs and efforts to use and allocate funds efficiently in maximizing business value. Financial activities not only take place in part or only financial functions, but also in other fields or business functions. But in the financial sector, financial activities are generally more strategic. The following are the activities carried out by the finance department:
- Funding or spending activities. The finance department will think about how and where the business will get funds.
- Investment activities. The finance department will think about which areas of investment are most profitable for investing the funds collected in the business.
- Dividend policy activities. The benefits of further investment activities will be considered by the finance department. Will everything be distributed to owners as dividends or retained all to finance the growth and development of the business.
MSME Activities Supporting Financial Management
To streamline various functions in business financial management, there are administrative tasks that should be carried out by SMEs. Order administration is also very useful as a business development planning tool. Some of the activities that need to be carried out by SMEs are as follows:
- Accounts receivable administration is an important record as internal and external information.
- Debt administration is a business obligation to external parties. Recording business debt is as important as accounts receivable. Reports on debt positions will provide a warning to business players to take various anticipatory steps towards the possibility of MSME financial difficulties in repaying debts.
- Inventory administration has a strategic role both businesses engaged in trade and manufacturing business.
- Administration of fixed assets serves to indicate when an item is purchased. As well as how to determine the rate of depreciation and start of the effect, as well as the expiration time.
- Cash administration, useful in providing information about how much cash comes in and cash comes out. So that the balance between revenue and expenditure can be maintained.
- Payroll administration is part of personnel management which is also the basis in tax calculation. Another benefit is to maintain a balance between changes that occur in the business environment related to employee performance.
Tips for Managing MSME Finances
Finance is the heart of every type of business. Because every movement in the business is always viewed from a financial perspective. Financial management really determines the future steps that must be taken by business people. Therefore, it is important for you to manage finances properly and correctly. So that business finance can be controlled properly. The following are some tips for managing finances in MSME:
- Separating personal money from business money.
- Budget spending as wisely as possible. Avoid expenses that are not important for business progress, and make a priority list of needs and budget in advance what determines business development.
- Record all business financial transactions. Prepare a special book to record every financial transaction that occurs in the business. Record all transactions and financial flows that occur in the form, then copied into the financial book.
- Control and oversee business cash flow.
- Provide reserve funds. Prepare funds to deal with emergencies by estimating the problems that may have to be faced when running a business. After that, determine the amount of value of the reserve fund. So this can reduce the impact of problems that come suddenly.
The benefit that can be expected from studying financial management is the management of business finance that is more planned and controlled. So that the consequences and consequences can be explained logically. In addition, there is a theoretical basis for financial management. This can be used to explain the phenomena that have occurred in the field of business finance.