Financial Hygiene is nothing but accurate and timely financial statements for any Organization. The main financial statements are Balance Sheets, Profit & Loss Statement and Cash Flow statements. Profit & Loss statements should reflect profit before depreciation & interest, profit before and after tax which matters a lot to the management, shareholders and external stake holders to understand the financial position of the company.
It seems like a lot of work but maintaining financial hygiene has many benefits, key of which are as follows
- Financial Transparency: This gives a clear and crisp picture about the profitability of your business and shows whether your profit is derived from income, enough cash is being generated by the business to pay for the operations of the business and so on.
- Better Decision Making, Planning and Forecasting: Analyzing financial statements is crucial when decisions, planning and forecasting are to be made. This helps the company to decide the requirement of funds to expand their business, working capital requirements, company debts etc.
- Improved Payment Cycles: In order to optimize the Accounts Payables, Accounts Receivables, Salary and other payments etc., accuracy of financial statements plays a key role for smooth running of the business.
- Sales Trend: Financial statements reveals the sales pattern over the years of sales figure and the business can identify the potential sales for the year.
- Performance Evaluations: The data in these statements helps the management to assess the performance of employees and their productivity.
The most important benefit is TRUST. Accurate financial statements inspire trust in the company. A healthy financial discipline generates confidence in investors to put their backing behind your business.
First published on www.bigmomentum.in