What you need to do to get better financial control
Thursday, July 23rd, 2009
Seasoned business executives will tell you they spend a great deal of their time dealing with problems. Regardless of how well you have planned there are always going to be problems that occur at the worst possible time. Discovering all of the problems you have to solve is a really difficult task. There is no place in a management team for a manager who is not adept at problem resolution.
You cannot manage a business without good financial controls. A good set of financial controls will sound the alarm and get the managers attention when financial problems begin to happen in the business. Many financial controls are accounting based and need to be implemented in the reports of generated by small business accounting software. For example good small business accounting software should produce reports that can compare the values of sales versus expenses in the budget to those resulting from actual activities. The best way to start is to identify a core group of the operating ratios you want to track and monitor and then craft the reports you need to highlight these key numbers in a coherent and easy to read format.
Any changes in margins on sales is a cause for concern and you should swiftly take action to understand why this is happening. Volume sales operations are particularly sensitive to changes in margins as losses can multiply quickly and therefore it is vital that you monitor both the changes in margin and volumes. You must monitor fixed expenses closely especially at the outset of the financial year and always make sure they are in line with your plan. Good small business accounting software should let you easily create debtors reports (people who owe you money) and the results in these reports should be monitored closely.
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.
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