By Rafael Martinez Medina, partner in Business Development and Strategic Consulting at TOMARIAL Abogados y Asesores Tributarios.
Although, to a lesser extent, many of the current managers who run SMEs believe that the financial department of their organization is limited only to developing adequate management of accounting processes, to the presentation of taxes and the most advanced to control and planning. of the flows of collections and payments.
This vision is incomplete and insufficient, with a highly competitive environment like the current one, where access to liquidity is complicated, with increasingly technical criteria, which move away from obtaining external economic resources to those companies with poor information and financial structures.
The null or scarce financial planning directly produces, jeopardizing the viability of the SME. Those of us who develop our professional activity in the financial world know that finance is much more than the financial statements of a company.
We make a correct financial address when we are able to:
- Design and implement a financial structure that does not limit the viability or growth of the company in any of the phases.
- Analyze whether the monthly and annual benefits obtained by the business, allows to meet all payment obligations.
- Control whether financial expenses are adequate or are absorbing much of our gross profit.
- Determine the appropriate financial products based on the type of assets that you want to acquire.
- Control and manage the operational needs of funds.
- Analyze the budget and anticipate liquidity.
- Define, implement and monitor appropriate indicators for the optimization of the different items of income and expenses.
These points, which seem obvious, are still not analyzed in many SMEs in our closest environment.
One of the mistakes that we observe in our professional day to day is to find a company that only has an indicator of how the evolution of it goes: that of profitability, that is to say if its Net Profit at the end of the year is positive no longer There are no analyzes that complement this data.
But nobody asks, with that Profitability, can I return the installments of the loans that I have committed? With that level of benefits I generate enough cash to support payment terms much longer than those of payment? Is my net profitability adequate to the average of my sector? Can I with this result open a delegation in the center of the peninsula?
The answers to these questions and many more that generate companies at the financial level, are those that must answer and in many cases anticipate a good responsible for the finances in the company.
Need and strength of a financial department
While it is true that, for many SMEs, developing their own financial department is very expensive, it is essential and necessary to implement this area in its organizational chart.
We cannot wait for a breach of our short-term payment obligations to see that we have in the company a problem of cash, real profitability or both. For this, we must propose alternative solutions that offer coverage to this need for financial analysis and control by the company. In the same way that many companies outsource departments such as marketing, HR, etc., we can do the same with the financial department.
If the company is capable of doing a good job of coordination between the accounting and administration department and the external financial consultant, this need will be covered at a much lower cost than a full-time company would entail.
Having clearly defined the objectives of this financial control, the person in charge of the department must report to the manager the information necessary for decision making.
But before, Our obligation as financial consultants is to train the manager in Two very clear aspects:
Firstly, become aware of the importance of finance in your organization, but our work will not take advantage of its full potential.
In second place, understand each of the concepts, ratios and indicators that we are going to report to you, so that your decision making is the most efficient.
Many current managers are excellent technicians in the sector where their business operates, they know the market movements instantly, they dominate the technology of their products or services perfectly, but they have no or little financial training. With the implementation of the financial department, we complement and enrich the entrepreneur in this strategic area so that together with the rest of the information, he can obtain a growing competitive advantage in his market.
The position of strength offered by the exhaustive and efficient control of the company's finances will be of great help at these times when corporate operations in all sectors are a permanent reality.
If we want as a company to be present or at least be able to opt for these mergers and acquisitions operations, our financial analysis is the first pillar for the beginning of the process.
In addition, this change of financial mentality will allow us to anticipate liquidity problems or, in the opposite case, to study options that allow us to obtain maximum profitability from our idle economic resources.
This article has been published in the June issue of the magazine Economía 3.
