It is incumbent on a company to meticulously strategize and allocate their finances to make the best of it since any project, payment, product or services directly or indirectly has got something to do with finance. This is simply the financial and monetary decisions made by the head of any corporate finance department.
Investopedia defines corporate finance as “a division or department that oversees the financial activities of a company. Corporate finance is primarily concerned with maximizing shareholder value through long-term and short-term financial planning and the implementation of various strategies. Everything from capital investment decisions to investment banking falls under the domain of corporate finance”. Every firm obviously has visions to grow over the next few years and as part of this strategic growth, the link between the growth and the available finances to safeguard the growth should not be too wide. As a matter of fact, if the department of the company responsible for managing its finance fails to employ pragmatic steps to make money available for any project, that Firm is bound to be heading towards extinction.
Financial indicators like cash flow are one of the major elements that should not be left out as far as the quest to achieve a sound corporate finance is concerned. Cash flow, which is basically, the movement of money in and out of an organization, obviously is one of the delicate departments of a company. Corporate finance primarily includes maximizing shareholders value through long term and short term financial planning and capital investment decisions. The firm must make conscious effort to stabilize this section of the company and thus certain methods and strategies need to be adopted to make it a reality. Below are three key issues, steps and skills that need to be adopted to efficiently manage your company’s finance.
1. Efficient capital investment decision and management: Strategic capital investment must be in such a way that, positive value pops up after the financing of any project. The amount of cash available must be efficiently disbursed among projects in order to make cash available for other activities and operations as far as the business is concerned. The company has to prioritize its capital investment decisions, for example, if the purchase of machinery can increase production a hundred fold and the purchase of another fixed asset can also increase productivity but not efficiently as the machinery, obviously, the former has to be opted for to increase cash flow in the long run. The bottom-line is that, if a firm puts in effort to increase productivity and cash flow through good decisions in capital investment, its finance would be stabilized.
2. Receivable Management: The amount of money that flows into the company’s account is also a very essential part of corporate finance. An organization should learn how to efficiently economize its receivables and to maintain a high standard of accountability in such receivables. This should be so because, poorly mismanaged cash and other receivables can hinder the financing of other operations in and outside the business.
3. Proper book-keeping: In every profit-making entity, there is the dire need to properly keep books of account. The income statement and statement of financial position indirectly has something to do with the finances. The income statement brings forth the company’s income at the end of the period. This means the firm’s finances are based on the assumption that, if the income is not up to expectation, obviously, there have been irregularities in the financial state at the end of that period. If the books are not kept well, the head in charge of the corporate finance would not be able to decipher how their finances are faring.
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