A Guide to Better Financial Management for Businessmen in the UAE

The activities of each aspect of the business have an effect on the financial performance of the company and should be controlled and evaluated by the owner of the business.

Life Cycle of the Business

There are many companies that go through losses & negative cash flows in their initial stages. Financial management is very essential in this duration. The managers should ensure that they hold a suitable amount of liquid cash to make payment to the suppliers and employees even if their cash outflow is more than cash inflow during the initial months of the business.

This means that the owners should prepare financial projections of such negative cash flows such that they have an idea of the amount of capital that will be required for funding the business till the time it becomes profitable.

With the growth and maturity of the business, more cash will be required for financing its further growth. The budgeting and planning for such financial requirements are essential. The financial managers are responsible for deciding whether to do the funding of the expansion internally or borrow externally from outside lenders.

The purpose of financial management is looking for a proper funding source at the lowest possible cost, controlling the cost of capital of the company and not allowing the balance sheet to become highly leveraged with debt along with a negative impact on the credit rating.

Financial management or financial planning is not just limited to businessmen. Every individual must have a financial plan.

After all, nobody wishes to be wasteful with their hard-earned money. However, because of busy schedules, it usually becomes challenging to stop and think about those tiny changes you can make for protecting or saving your money.

With the entry of VAT (Value Added Tax) in the Emirates and the increase in the costs due to inflation has attracted attention to the effect on the spending habits of the customers.

While such potential pressures on the expenses of people may seem problematic, honestly they are not required to be. However, it is essential for you to take stock of your own financial planning for ensuring financial security in the long run. In case this is something you have been having problems with, we have listed for you some useful tips to help you plan your finances and manage them well.

Planning for Future

It’s true, saving is an amazing tool. However, dormant funds can be put to better use too. So, find opportunities for investing in tools and products, which may help you achieve your objectives further.

You can consider a variety of investment options like real estate, managed funds, term deposits, bonds, stocks, and more. However, it is important to do your homework and seek a piece of expert advice on the solution that would be the best for you.

It is very rare that your life will go the way you planned it to. Unexpected changes in your employment, health, job status, unplanned repairs, and dependents can disturb even the best and well-balanced monthly budgets as well as long-term objectives.

Hence, it is important to ensure that you consider insurance solutions such as critical illness & life insurance, emergency fund savings, consumer credit solutions, and various other kinds of insurance for protecting your savings.

Better Budgeting

Before you begin to dream about your precious savings stack up, you need to identify where exactly are your hard-earned dirhams going. We understand that is painful to keep a check on each petty expense you make. However, trivial small amounts should be taken into consideration in the grand schemes of things.

For example, your regular expense on a coffee of say about 20 dirhams makes a huge amount when calculated yearly. Hence, it must be accounted for.

One of the simplest ways of preparing a simple budget is by downloading a template, which suits you. You can use some mobile app that serves as a practical guide having tips, information, and tools.

While preparing a budget, try to be totally honest and very comprehensive. On average, one individual spends funds three times in a day. Keep your receipts safe and check your bank statements so that you know what amount of expenses were wants instead of necessities.

As a matter of fact, there was a recent survey that showed around 42 percent of the residents in the UAE have no clue on how to make a proper budget.

Pressure or Stress is a Big No-No

Be very careful when it comes to temptations. It is very easy for us to give-in on a desirable option or retail therapy sometimes.

Moreover, it is also easy to get into the pressure of social competition with family or friends bragging or showing off their luxury holidays or the latest shopping in person as well as on social media. Be careful of not getting into impulsive shopping or other expenses on the basis of social pressure.

Making SMART Financial Objectives

Do you know what is the best way of setting financial goals? Think SMART-ly.

You must start saving early as well as regularly. This will help you in building a foundation for achieving your financial objective with time.

If you look carefully, then every letter of the word SMART stands for a characteristic of a suitable objective.

S: Specific

M: Measurable

A: Achievable

R: Realistic

T: Time-bound

Hence, your objectives should be SMART.

Whether you are planning to purchase a new vehicle, buy a new house, fund the college fees of your child, going on your dream trip, or fund your retirement plan, make a list of all of them and prioritize if these SMART objectives are your need or want. Quite naturally, your needs should be on priority.

After you know what you really want and need, and have prioritized your objectives, ensure that you make payment to yourself first by saving a definite amount from your income before starting to spend on anything. This will help you in putting aside a particular amount to your savings objective monthly.

In a Nutshell!

Financial planning, as well as financial management, are important aspects of a healthy financial life. The above-mentioned tips will help you in managing your finances well.

Always remember one thing-

Whenever you pull out your wallet out of your pocket or bag, always ask yourself if the potential purchase is a want or a need. Think about whether it is a SMART objective or not. Analyze if you can put that money to some better use. And finally, if you can actually afford it or not.