If you want to succeed in a business you're running, you need to know about financial management of your company. No matter how skilled you are at creating a product, providing a service, or marketing your wares, the money you earn will slip between your fingers if you don't know how to efficiently collect, keep track of, save and spend or invest it wisely.

When poorly managed, financial management become a number one reason that lead a business to a failure -- no matter whether it's new or established business. In many cases, failure could have been avoided if the owners had applied sound financial principles to all their dealings and decisions. Financial management is not something that you can leave to your banker, financial planner, or accountant — you need to understand the basic principles yourself and use them on a daily basis, even if you plan to leave the more complicated work to hired professionals.

These are some of financial management tools that are most used, in general, by small businesses.

• Basic bookkeeping helps you recording daily transactions, working with your accountant and banker, and, for the do-it-yourselfers, how to close the books and draw up financial statements.
  
  
• Credit and collection records helps you overseeing the pros and cons of accepting credit cards or offering trade credit, and tells you when you need to more quickly and effectively collect the money your customers owe you.
  
  
• Having a cash flow statement helps you managing your cash flow to reduce the lag between cash outflows and inflows, and prepare you to make decision to invest the surplus cash you'll soon have on hand.
  
  
• Records of major purchases and projects helps you to evaluate larger investments in capital equipment or business facilities, by using some of the same financial tools used by accountants and other financial professionals.
  
  
• Analyzing your current financial position arms you with sophisticated ways of examining your financial statements and other aspects of your business, and identifying trends, spot emerging problems as well as comparing your business to others in the same industry.
  

Managing Your Small Business Finances