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How Does Good Financial Management Help Your Business?
By Lea Terry, eHow Contributor
Your company's finances aren't just assets; they're also the foundation for longevity and growth. Good financial management helps your organization survive a fluctuating economy, gives you an advantage over competitors and provides the resources to support a strong workforce. If you consider your finances in every decision and at every step of your company's growth, you can provide a solid future for the organization and its employees.
Gives You a Competitive Edge
Sound finances aren't just crucial to starting a business, they're also key to outperforming competitors. You'll have more resources to invest in refining your product or service, which could increase customer satisfaction and loyalty. You'll have more money for marketing and promotions, helping you reach a larger share of consumers. You may even be able to offer discounts or special offers to your customers that competitors can't afford, creating goodwill among customers and attracting more prospective clients or buyers.
Helps You Survive Economic Turbulence
According to "6 Ways to Dig Out of Debt," a Feb. 2, 2010, "Entrepreneur" magazine article, the number of businesses nationwide filing for bankruptcy protection had increased 57 percent since the same time the year before. With a sometimes turbulent economy, good financial management is your company's insurance policy in case of economic downturn.
If your finances are sound to begin with, an economic downturn probably won't impact you as negatively, or as quickly, as it will companies who are already struggling financially. And if your company is affected, you'll have the resources to continue operating during tough times, possibly without being forced to make drastic changes.
Makes You a Good Investment
A solid financial record is one of the biggest contributing factors in securing loans and other funding. Issues with your credit or financial record could prevent you from receiving credit, loans or other funding if you ever want or need it, for expansion or to help you get by during a tough economic period. But if you've managed your money well throughout the life of your business, lenders and investors will be more likely to work with you.
Enables Growth and Expansion
Good financial management not only supports day-to-day operations, it's also key to growing your company. Without it, you won't have the resources to hire more employees, open new facilities or invest in product development. By knowing your long-term goals, you can manage your financial resources to ensure you have what you need when you decide to open that second store or start marketing to potential customers in Europe, for example.
Helps You Attract and Retain Employees
Strict financial management is crucial to attracting the most talented employees, being able to hire additional staff when needed and ensuring you don't have to cut benefits or salaries when the economy is down. Prospective employees may consider both the salary and benefits offered by a company, and its financial history. If you can demonstrate that your finances are healthy, you can inspire confidence among candidates in your ability to support them and the company. You'll also be able to offer a more attractive compensation plan than other businesses.
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