How to set goals in financial management — and achieve them

In 1999, Marvel Entertainment was on the verge of bankruptcy, and the share price was a miserable 0.94 cents per share. Sales stagnated and the company was burdened with debts of 250 million dollars. In this dark hour, however, it wasn't a superhero who saved the company — but clever financial management.

It is no secret that Marvel managed to save itself and then produce some of the most successful films of all. And of course, not every company is going to be as profitable as Marvel is. But we can all learn from Marvel's strategy for success.

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Why does my company need financial management at all?

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The success of a company must be strategically planned, whether to turn around a sinking ship or to boost the growth of an already profitable company. In order to be able to make optimal use of the usually scarce resources, finance departments must be methodical when setting financial management goals. By setting clear goals for profit maximization, cash flow, and cost minimization, the finance team ensures that the company is always on a solid financial footing and is able to make informed business decisions.

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This is how successful financial management works

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The companies that are successful aren't the ones that run into a once-in-a-lifetime opportunity or simply get lucky. No, it is much more the ones who pursue a precisely planned financial strategy. And that's how it works.

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1) Create a financial plan

Clearly defining goals, setting deadlines and determining the available resources — that is the be-all and end-all of a well-thought-out and structured financial plan. Market research is also important to find out which goals are realistic. Finally, you should assess your willingness to take risks and know the advantages and disadvantages of all possible decisions.

For Marvel, this meant being honest with themselves and recognizing the limits set for them by their limited budget. That meant they couldn't start making their own movies and instead decided to license their characters to multiple studios. In this way, risk was distributed and the reach of intellectual property was maximized while keeping costs low.

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2) Define the budget

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With the help of a budget, you can determine which resources are needed to carry out a project. It provides information on the funding required for recruitment, development and other purposes. It should also include fixed, variable and semi-variable costs, the sales and income required for the various projects, and an estimate of the expected profit.

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3) Managing cash flow

A good understanding of cash flow is critical for planning, forecasting, raising capital, and making strategic decisions. The following are some key ways companies can better manage their cash flow:

• Automated bank reconciliaries:
  During bank reconciliation, transactions are compared with the account statement. If this is done manually, errors can occur, particularly with a large number of transactions. Automation makes it possible to quickly identify errors that could have a negative impact on cash flow. For example, a supplier could have charged a double amount. Numarics, by the way, uses cutting-edge AI technology to automate repetitive bank reconciliations.
• Analyze margins:
  Financial management is primarily about increasing efficiency. When the company analyzes its profit margins, it can uncover and eliminate inefficiencies in its operations. When cash is spent on unnecessary expenses (such as software subscriptions that aren't being used) or when the cost of sales is higher than expected, adjustments should be made.
• Managing liquidity:
  How well is the company able to pay long-term debt (solvency) and short-term debt (liquidity)? Sales may need to be increased, equity increased, or assets sold to remain solvent. If it's difficult to stay cash, assets may need to be leased rather than bought, outstanding balances may need to be analyzed to ensure they're paid quickly enough, invoicing must be automated, and suppliers may have to wait longer before being paid.

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4) Test and optimize

There are a million things that can affect the financial plan: Management can change, investors can have new ideas, and customers can drop out or join. Every plan has challenges, and it comes down to how you respond and adapt to them.

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Improve accounting

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With good bookkeeping, it is much easier to achieve financial management goals. If the books aren't in order, the whole company is disorganized and projects only progress slowly. Poor financial accounting, improper reconciliations and a disorganized chart of accounts are particularly problematic for many companies.

Numarics is the competent partner for all questions relating to trust and accounting.

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