Why a financial management system is crucial

“So many financial dreams are thwarted by the failure to act upon good intentions. —Suze Orman

SMEs Chat with Phillip Chichoni

The other day I dropped by Nando’s restaurant to buy a quick lunch. The friendly lady serving told me to wait for five minutes and my lunch would be ready.

I watched as my order was passed on to the kitchen, prepared and packed. Before the five minutes were up, my buzzer rang, signalling that my lemon and herbs quarter chicken and chips were ready for collection. No matter which branch of the restaurant you go to, the process works the same. It is methodical like clock work.

McDonald’s is the world’s largest chain of hamburger fast food restaurants, found in nearly 120 countries. McDonald’s does not make the best burgers.

In fact, when the brothers Richard and Maurice McDonald founded it in 1940, it was just an ordinary barbecue restaurant. It was eight years later when they introduced production line principles that the business started growing. Ray Kroc then purchased it from the McDonalds brothers and started overseeing its worldwide growth through franchises and affiliates.

The McDonalds system works, that is why chains like Nando’s have adopted it.

Almost any work can be systematic. Good work gets done when there are systems. Nando’s did not succeed by hiring people and challenging them to figure out how best to do their job. Instead, they developed a system because they know there is a best way to take an order, greet a customer, grill chicken, fry potatoes and serve a meal.

To develop a system, you need to figure out the best way to do it; get the necessary tools, document the most effective processes and train everyone in how to work the right way. As a result, people work the systems, and the system works.

Because of the system, Nando’s, like McDonalds, can make almost anyone, regardless of their capabilities, into productive and effective employees. Their product and service standards are the same whichever branch you visit.

Good systems make people more effective, whatever type of work they do. There are better ways to assemble a computer, to perform surgery, to write a business plan or to construct a building. Professionals in any field do better work by developing and following systems.
Now we know that good financial management is one of the key factors to business success. Many a business has gone down due to financial problems caused by poor financial management. If you don’t practise good financial management, you are likely to face the following problems:

You will not be able to keep track of your revenues and expenditures.
You will likely run out of cash unexpectedly.

You might lose track of your collectables and receivables.
Zimra will be on your case for tax records maintenance.
You will not be able to properly plan or budget.

Theft and fraud will not be so easy to detect or prevent.
I know that many small business owners are not financial people. Still, some handle all the daily financial tasks, like collecting receivables, banking, cash withdrawals and making payments. It is understandable to want to keep a close hand on your cash, especially when the business is still young. As the business grows, however, such tasks may need to be delegated as they can waste precious time better used on more important activities. You should be able to delegate while maintaining control. This is where a financial management system comes in.

To develop your financial management system, you need to observe the movements of cash in your business. Look at processes like invoicing, receipting, payments, banking and cash withdrawals. Write down the process stages step by step. Develop the documents needed when cash moves, like invoices, payment vouchers, payment requisitions and so on. A good system needs accountability. There must be a record for each movement of cash from one person to another, or from or into the firm.

Once you have all the financial movement processes documented, you then need to work with the people who will be involved in finance and accounting to find the best practice for each task. Don’t create too much paper work or irrelevant processes. A good system is simple enough for anyone to understand and follow. An independent person from outside your firm can help you review the system with an objective mind.

Your financial management system manual will still be essential even when you install computerised accounting. Signed paper documents still need to be kept for accountability and record purposes.
Until next week, keep on accelerating your growth.

Phillip Chichoni is a business development consultant who works with SMEs and entrepreneurs. email: chichonip@smebusinesslink.com
visit: http://smebusinesslink.com

2 Responses to Why a financial management system is crucial

  1. student October 15, 2013 at 7:52 am #

    starting from the intro its off topic hw can u start with talking with the service delivery of nandos while u want to talk about financial management. then after all u just state proceduers of handling cash or to say movement of cash rather than to talk about facts that enables effective and effeciency management of cash . facors that lead to some one reduce cost or vto earn more interest given the few liquidity resources that one has at a particulal point . in a nutshell there is nothing on your article except managing your self on tne grounds of an article.

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