Implementing better financial controls

business accounting software

Even the most experienced business managers will be able to share with you how much time they spend in their working week dealing with problems. Problems that you know might occur, usually raise their head at the worst possible time. Knowing you have a real problem to solve can only happen if you know what you should be watching. Every manager has to be a problem solver and get on top of problems the moment they occur.

You cannot manage a business without good financial controls. Financial controls act like trip wires that alert managers to imminent or immediate problems. 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. For example good small business accounting software should report actual sales revenue versus budgeted sales revenue for a specified timescale or period. Begin by identifying a minimal group of numbers and relationships that you need to monitor and then design your accounting or financial reports to present these critical factors in the right format.

You must closely monitor the margins on what you sell and any deviation from what you set out to achieve regardless how minor should be immediately investigated and understood. 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. 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. Debtors collections should be monitored closely, the best way to do this is to run reports that highlight the average number of days it takes to collect payments (small business accounting software is particularly adept at this.

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.