Every entrepreneur knows the importance of corporate financial control for their business to grow, as a well-structured company can develop much more safely. However, there are still many insecurities regarding this financial management and how to do it properly. After all, it’s not an easy task to lead a venture and still have full control over your business finances.
With that in mind, we have separated everything you need to know to organize a suitable business financial control for your business.
- What is business financial control?
- How to do this control?
- What are your advantages?
Read on to find out everything about it!
There is no doubt that organization is essential for every business. Despite this, in addition to many being intimidated by the apparent complexity of management, there are also those who think that corporate financial control is only necessary for large businesses. Wrong! Yes, financial management is extremely important for every company.
Therefore, we separate a list of all the steps to be followed to carry out adequate financial control. But first, it is necessary to understand what business financial control really is.
What is business financial control?
It consists of analyzing the financial condition of a business through several processes, which will be explained later. The objective of such management is to ensure that the company presents positive results and obtains financial profit in order to have optimistic growth forecasts in the short, medium and long term. Thus, it is necessary to have control of all the data and assets of the business so that everything is considered in the strategies and forecasts.
Well, now that you know what business financial control is, it’s time to understand how to do it. Next, you will see the step-by-step process to make a proper financial control of your business:
1. Cash flow
Firstly, one of the most important financial control processes is to closely and constantly monitor the inflow and outflow of cash from your cash register. Thus, the accumulation of debts is avoided. It is also guaranteed that there will be cash available for future investments. For this, you need to set a time in your routine to perform this analysis to always be aware of cash flow.
2. Registration of movements
Then, for the cash flow to work correctly, it is necessary to record all financial transactions at the exact moment they occur, regardless of their value. After all, having control over amounts and deadlines is essential to define the best billing strategy for your customers. In addition to negotiating payment terms with its suppliers.
3. Financial reserve fund
Even if strategies and plans are drawn up, not all company expenses can be predicted. For example, if a computer is damaged, it is necessary to spend a certain amount, not foreseen, for its repair. Thus, so that the impact of this cost is not so great, it is important to keep a reserve fund for such unexpected expenses.
Therefore, it is recommended that this fund be created at a time when the company has a certain amount of accumulated capital. Thus, in order not to damage the cash flow.
4. Budgets and projections
It is necessary to establish a budget for the company, which can be monthly, semi-annual or annual. So create a budget for each sector of your business. And control by cost center to ensure that all expenses are within the defined budget. Thus, with this budget, it is possible to have future forecasts and create more effective long-term plans that are better aligned with investments.
5. Differentiate business and personal expenses
Although the entrepreneur leads his business, he is not the company. Thus, it is extremely necessary to differentiate company money and individual money. Do not use company money for personal expenses, as it is frowned upon by your partners or even your team. Besides, of course, being able to damage your business cashier.
If your company has partners, define a pro-labore for them in order to clarify how much each one should receive, an amount that can be used by each one in the way they need. However, if your business does not have partners, establish what percentage of your profit will be allocated for personal expenses and what will be for business expenses.
6. Risk management
Risks in the financial world can be classified into four main types:
- Operational risk: referring to all types of failure within the organization;
- Market risk: caused by market fluctuations, their prices and quotations;
- Liquidity risk: related to the ability of businesses to pay off their debts on time and, therefore, is linked to cash flow failures.
- As well as credit risk: which refers to the possibility of the company not receiving an amount owed to it.
All businesses must be prepared for a crisis. These risks are linked to the company’s entire financial operation, including its return on investment. Therefore, always be aware of cash flow and the risks that may impact your business.
7. Partnership with your accountant
Your accountant is, after you, the person who most understands your company and its results. Therefore, it is essential to establish a genuine partnership with him and work together to make your business grow. After all, the accountant is a specialist in the field of business and can guide you in organizing your venture, correct possible planning errors and answer your questions on the subject.
Your business will not grow if you don’t believe in your business. Therefore, invest in your enterprise to stimulate it and keep it competitive in the market, applying new investments to guarantee the expansion of your business. But don’t forget to strategize. That is, it is necessary to plan such investments well so that there are no bad surprises in the future.
What are the advantages of business financial control?
By now, it is already possible to understand how important corporate financial control is for all businesses. However, in addition to ensuring the safe growth of your company, this financial management also brings several other advantages. We separate a list with the top 6. So check it out:
1. Financial security
Financial security is one of the main points for a company to succeed. With business financial control, you can monitor cash flow and ensure greater financial security for your business. After all, you will have a complete idea of expenses and profit, in addition to having better conditions to know how to invest in your company.
Second, when financial control is carried out, all cash inflows and outflows are recorded. Thus, making it possible to analyze costs and what strategies can be made to reduce them. It is also possible to achieve greater savings in the day-to-day activities of the company.
3. Return on investment analysis
The calculation of ROI (return on investment) is essential for every business to evaluate the results of the company, verifying if you are making a loss or a profit. And corporate financial control allows this calculation to be done in the best possible way. That is, it offers a better assessment of the financial health of your business.
4. Business follow-up
Financial control allows the entrepreneur to closely monitor his company, something extremely important to obtain correct data on the performance of his business. After all, having real and accurate information is fundamental to the success of your enterprise.
5. Better decision making
Having to make decisions about the direction of the company always seems to be a risk. However, with control, you can make this decision more smoothly and with a greater probability of success. Once you are aware of the financial health of your business.
In entrepreneurship, there are several bureaucratic demands, such as:
- organize management reports;
- make the accounting balance;
- declare taxes, among others.
By carrying out financial control, these activities become more practical, since all information is recorded on a daily basis. That is, you don’t have to stress to look for them at the last moment.