The concept of financial intelligence is often used when talking about managing personal finances and what this involves in practice. However, this ability does not only apply to this personal context.
After all, financial intelligence can be a relevant element for business management — contributing to the maturity and development of the enterprise. Therefore, it is worth knowing how the concept can be applied to the management of your business.
Want to know the answer? Continue reading this article to understand what financial intelligence is, its importance for companies and how to apply the concept to your business!
What is financial intelligence?
Financial intelligence represents a set of good practices related to the way you deal with money. On a personal level, many people tend to associate the concept with the accumulation of resources.
However, while there is a relationship between financial intelligence and increasing your wealth, the two ideas are not synonymous. Instead, the focus of financial intelligence is on making better use of your money — regardless of how much you have available.
Therefore, there are several elements linked to this concept. Saving money in everyday life, healthy consumption habits and good investments in the market are examples that deserve to be highlighted.
Furthermore, financial intelligence can be developed in your daily life — both personal and business. From there, you can achieve more balance in these areas of life.
How important is this concept in the business world?
As you have seen, the concept of financial intelligence also applies to business management. In the business environment, it represents good practices in managing corporate finances.
In fact, in a business context, financial intelligence can be even more important than in a personal context. This is because, naturally, managing your business budget can be more complex than controlling your personal finances.
Adopting good financial practices helps, for example, to manage the company’s working capital . This way, the business can have resources available to cover daily expenses, minimizing operational risks.
Financial intelligence will also be valuable in enabling the company’s growth. By using available capital more wisely, it will be possible to execute expansion plans and take the business to new heights.
Furthermore, failure to adopt these good practices can pose risks to the company’s processes. If resources are not managed properly, debt can increase. In this situation, the business’s development may be compromised.
How to apply financial intelligence in the company?
Now that you know what financial intelligence is and how important it is for companies, it’s worth knowing how to apply the concept to your business.
Check out the main steps to consider when adopting this practice!
Diagnose the company’s current situation
The first step to achieving financial intelligence in a company is to diagnose its current situation. Through this process, it will be possible to identify the financial health of the business and the management challenges it faces.
The diagnosis will also work as a business mapping. From it, you will understand what the current results are and whether they are satisfactory for the company’s objectives. In addition, the process allows you to identify areas for improvement in financial management.
For example, if the company has many financial commitments, it would be a good idea to categorize them according to the deadline. This way, it is possible to organize finances to avoid accumulating debts and even find better payment conditions.
Strategically plan development
After diagnosing the company’s situation, the next step in adopting financial intelligence is to draw up development plans for the business. To do so, it is necessary to define the company’s objectives for the short, medium and long term.
These goals must be achievable and, in fact, important to the organization. This will make it easier to allocate the necessary resources to each area of strategic planning in order to achieve the objectives.
It is also necessary to analyze the results frequently. Practice will be essential to see whether the current planning is having the expected effect or whether it is necessary to make adjustments to the route.
Adopt performance indicators
Performance indicators are fundamental elements for business management. They help, for example, to increase employee productivity and optimize the execution of internal business tasks.
They can also be used for financial management. In fact, there are many financial indicators that are relevant to small and medium-sized companies, such as:
- fixed and variable costs;
- cash flow;
- profit margin;
- average ticket;
- customer acquisition cost;
- between others.
Understanding these issues and regularly monitoring the numbers helps to increase clarity about the company’s financial situation. If inconsistencies are identified, it will be possible to work more quickly to find solutions.
Make data-driven decisions
Business management becomes smarter when decisions are made based on data. In other words, managers must have relevant and current information to study the next steps for the business according to the market situation.
Financial indicators, for example, will contribute positively to effective decision-making. Furthermore, it is worth analyzing market projections regarding the company’s niche to have even more solid information.
