Top Five Financial Management Practices
Good financial management practices are essential to ensuring an organization remains solvent and meets its objectives. Over the years we have provided financial management advice to hundreds of organizations, helping them to establish a solid financial management foundation. We were recently asked for our top five financial management recommendations, and came up with the following:
- Find a CPA (Chartered Professional Accountant) who understands your organization, and put them on a retainer. CPA’s who provide financial management services to organizations on a part-time basis are often called Virtual CFO’s. These professionals can be invaluable in helping keep your business on a financially sound footing, are much more affordable than hiring a full-time CFO, and their services are scalable as your organization grows. Virtual CFO’s are a trusted source of financial expertise, typically bringing diverse experience and a fresh perspective from having worked with many organizations.
- Eliminate paper cheques, and pay vendors using EFT (electronic funds transfer), electronic banking or by using a 3rd party payment service such as Telpay. Paper cheques are highly susceptible to fraud, can be very costly, and should be avoided as a method of payment.
- Outsource payroll to a third party. There are numerous benefits to outsourcing payroll, including lower costs, reduced risk, increased security of payroll information, and eliminating the need to recruit and train payroll specialists.
- Reconcile bank accounts to the General Ledger (G/L) on a daily basis or at least a weekly basis to identify errors, unauthorized withdrawals and potential cheque fraud. Immediately investigate any discrepancies. The G/L accounts must be reconciled in order for any financial reports to be meaningful and accurate.
- Establish a line of credit with your bank. The cyclical nature of cash flows may require your organization borrow money to meet its short-term needs. The best time to negotiate a line of credit is when you can show you don’t need it!
There are of course many other important financial management practices, making it challenging to narrow down the list to only five. However, the above are recommendations we make quite frequently, and each one can have a significant impact on your organization’s well-being.
Find out more about establishing excellent financial management practices – call me and we can have a conversation. We can also talk about improving operating efficiency, reducing costs and strengthening your organization. Reach me at 613-727-1230 ext. 212 or firstname.lastname@example.org
Richard MacNeill, FCPA, FCMA, CMC, Dipl. T. is a partner at OTUS Group, a team of advisors to business, government and not-for-profit organizations