Good financial practices drive the growth of small businesses

Financial management is one of the main challenges faced by small entrepreneurs. Often, the lack of organization and control over the available resources can lead to difficulties that compromise the growth and even the survival of the business. However, when well executed, good financial management can be the differential that turns a regional company into a success case.

According to a survey conducted by Sebrae, 50% of small businesses close their doors before completing five years of activity, and poor financial management is pointed out as one of the main causes. The study reveals that many entrepreneurs do not separate personal finances from business, and do not carry out adequate planning for the future. These data show that without efficient control, even promising businesses may not reach their maximum potential.

Samuel Modesto, expert in business management and business mentor, reinforces the importance of a strategic vision for financial success. “Many entrepreneurs focus only on billing and forget that real profit depends on a strict control of expenses. In addition, it is essential to have a planning that includes reserves for unforeseen and future investments. Without this, any growth can be fleeting”, he explains. He further highlights that lack of attention to details such as cash flow and fixed costs can lead to misguided decisions, such as cuts in essential areas or unnecessary investments.

Financial planning as a basis for strategic decisions

One of the first steps to efficient financial management is planning. Setting clear goals, both short and long term, helps to direct resources more assertively. For example, a small business that wants to expand its operations can start with a plan to reduce operating costs, such as renegotiating contracts with suppliers or adopting technologies that optimize processes.

Another important point is the separation between personal and business finances. Many entrepreneurs make the mistake of using the company's cash to cover personal expenses, which can generate a financial imbalance. Creating an exclusive account for the business and establishing a fixed pro-labore are simple measures, but they make all the difference.

Cash control and the impact on day to day

Cash control is another essential tool for the financial health of a company. Knowing exactly how much goes in and out of the cashier allows you to identify spending patterns, avoid waste and make more informed decisions. 

For Samuel Modesto, this control must be daily.“Cash flow cannot be neglected. It is he who will show whether the company is generating profit or just surviving.In addition, with a detailed control, it is possible to identify opportunities for improvement and investment”, he says.

A practical example is that of a small bakery that, when analyzing its cash flow, realizes that part of its products is being wasted due to poor inventory management. With adjustments in the purchasing and production process, the company can reduce costs and increase its profit margin.

The importance of reserves and investments

Finally, the creation of a financial reserve is a step that many small companies ignore, but that can be decisive in times of crisis. Having an emergency fund ensures that the company can face unforeseen events, such as falls in sales or increased costs, without compromising its operations. In addition, part of the profits must be reinvested in the business, whether in infrastructure, team training or expansion.

Samuel Modesto concludes with a piece of advice for entrepreneurs.“Financial management is not just about numbers, but about vision and discipline. Those who can see beyond the present and plan carefully are better prepared to face the challenges and take advantage of the opportunities that arise on the” path, he concludes.