Implementing better financial controls

Most good business managers can tell you how much of their time is devoted to dealing with problems in the business. Serious business problems generally occur unexpectedly and to the unprepared. Finding problems you have to solve in a business is a real challenge. You cannot grow a good business without managers who are great problem solvers.

In summary, every business manager has to have good financial controls. The purpose of financial controls is to identify financial problems and raise the alarm. As most financial controls are accounting based, it’s a good idea to make sure you have a good small business accounting software package to give you the reports that support managing financial controls. It is critical that you can create reports using small business accounting software that let you examine the differences between planned and actuals in focus areas such as cash flow, expenses and revenue. Start with a simple set of the critical operating ratios and balances and make sure your reports can highlight these.

Vigilantly keep an eye on the margin on sales and don’t hesitate to investigate any changes regardless how insignificant they might be. Decreases in volumes of products sold or their respective margins can rapidly lead to immense decreases in profitability and therefore its important that you know about these and react quickly. Don’t ever let fixed costs deviate from the plan especially in the first quarter of the year. Scrutinise the debtors reports found in most small business accounting software specifically for the average number of days it takes for you to get your invoices paid, this is a really essential operating ratio that every business should have in place.

Experience is the way to learn and over time you will learn which financial controls should be highlighted in your accounting reports, just make sure you have the right small business accounting software that can generate these.