Many businesses, startups or established, fail for a variety of reasons. In fact, less than half of these startups survive beyond five years. Unsurprisingly, the primary cause of this is poor financial control.
It is clear and evident that a finance person’s role in managing a company’s financial resources is very crucial. A better and more effective financial control process is vital to every business – big or small, startup or established.
How important is corporate financial control? How can financial managers improve the process?
THE IMPORTANCE OF CORPORATE FINANCIAL CONTROL
Corporate financial control plays a tremendous role in both day-to-day management of the business and in broader strategic planning which is essential for business longevity and growth.
Financial control is at the heart of running a successful business. It affects every aspect – from managing cash flow and tracking business performance to developing plans that ensure that stakeholders can make the most out of available market opportunities. It involves planning, analysing, organising, controlling and monitoring financial resources in order to achieve business objectives.
Good financial control will help businesses make an effective allocation of resources, fulfill commitments to its stakeholders, gain competitive advantage, and achieve long-term financial stability. It should become part of the key processes within the business and it should be included in the ongoing planning.
Of course good financial control is easier discussed than implemented. It is complex, it is multi-departmental, and it sometimes requires drastic changes. The following tips will help your business gain better control of your company´s financial resources.
- A clear business plan
Business plans help you map the future of the business. It is very important that as a CEO, CFO or financial manager, you have a clear and integrated business plan in order to manage the business effectively.
By having a plan, you can chart specific courses of actions that need to be taken at certain times triggered by certain external or internal factors in order to improve the operations and achieve set objectives and goals.
- Know the Operational costs
Even the most profitable companies can face cash flow difficulties if there isn’t enough cash to cover day-to-day costs such as rent and salaries. You should be aware of the costs needed to keep the operations going in case the inflow of cash is not regular or in case certain payments are delayed.
- Keep accurate and up-to-date accounting records
It is important to keep the accounting records accurate as it is the CFO´s or the CEO´s tool in decision making. However, no matter how accurate if the figures are also not updated, it is not relevant so both accuracy and timely relevance should go hand in hand.
- Anticipate problems and anticipate solutions
One of the most important financial activity for any company apart from budgeting is forecasting and doing what if scenarios. All businesses regardless of whether it be startup or established must be able to forecast sales and profit. It must be able to anticipate problems by doing what if analysis and then preparing a battlecard for how to tackle these potential problems if they arise.
- Invest in a good and reliable accounting technology
One of the mistakes of many businesses that contribute to certain degrees of failure and which leads them to be less competitive is not investing in good technology. There are multi-million businesses out there that could have done so much better had they invested early on in good accounting technology.
Some of these very established and traditional companies still do all their accounting activities in Excel spreadsheets making it very prone to errors and wasting precious time of their finance personnel. Instead of doing deep dive analysis, they spend so much time fixing broken links and macros in spreadsheets instead. Invest in a good accounting technology that´ll help you have a better grip and understanding of your company´s financial health.
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