Did you know that more than 60% of the problems that cause a company to close, are caused by lack of financial control?
The fact is that many entrepreneurs do not know about finance and those who do have time to take care of this area. Not to mention the myth that finance is something very difficult for small business owners.
Know that if you do not take care of the finances of your company it is very likely that soon your business may have problems or even a break in business.
The most important thing is to start.
That is why we have prepared the most basic questions you should know about your company in order to have an efficient financial control.
Follow through on the questions and then be honest whether or not you were able to answer them easily.
1. What is the amount available in Cash and Banks?
It is possible for a company to survive without profit. But I am unaware of one that survives without cash for a while.
Knowing how much you have available to pay bills today, it is essential to start a check that your business is doing well. ´
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There is nothing wrong with starting to control your finances through “Bank Balance Accounting”. If your company has working capital regularity, this can even be an excellent form of control (we talked about this a lot in the Profit First Course ).
In some companies, including small ones, the value of cash is taken seriously. There are entrepreneurs who define a Minimum Cash for their Operation to avoid having problems of lack of resources at any time.
Do you know when you have cash today?
2. What is the amount receivable from customers today? And at the end of the month?
Stay tuned, having values receivable, means that you have made an investment with the company’s resources, because you are financing a client.
After all, you have already produced and delivered the product or service purchased by the customer, now you can only receive for them.
Knowing this information is essential for a Cash Flow, and your information base must consider the effective day, already discounting the effect of the payment of slips, or the term of the credit card.
Remember that there is also a risk of not receiving in many transactions. So consider this fact before calculating your cash flow considering the entire amount.
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Having a long horizon of these values, helps to keep finances up to date.
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3. How much are your accounts payable today? And at the end of the month?
Not having a financial balance to pay the bills can mean a lot of extra expenses.
This is because paying bills overdue will cause you to pay interest penalties, and perhaps even lose your credit condition.
You avoid inconvenience when you know this number very well.
Also consider making a Spending Budget. They helped you not spend more than you owed without a return on investment.
Knowing this number will also help you negotiate better terms with suppliers, reducing the need for Working Capital.
4. What is the value of your overdue accounts?
This is the money that was supposed to go into the box and didn’t.
It also means a lot of money that you must pay attention to receive.
Knowing your default rate will help you take effective action to reduce your default risk. You can change the form of payment, shorten the term or even do a credit analysis before selling.
The fact is, you must take steps to reduce this type of problem.
If you don’t know this number, run to do your financial control and find out.
5. What is your monthly billing amount? And what is the comparative value?
One of the most important indicators of a company’s operation is its turnover.
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Of course, it alone can mean nothing if it is not converted into cash. In addition, after billing there are problems such as receipt (or lack thereof), costs, and contribution margin.
That is why it is important that you monitor this indicator, set goals, and encourage its increase through your sales.
Compare with previous months, or even, if your business is seasonal, with the same period last year can be important.
Solution for Financial Control and focus on operation
So, how did the questions go? Did you answer? Or was it too difficult?
To do financial control, you need organization, dedication and basic knowledge on the topic.
Many entrepreneurs are focused on the operation and give very little of their time to take care of finances. That’s where the danger lives.
A current trend, to avoid labor costs for employees in the department, is to outsource the operation to a specialized company.
In addition to being more efficient in operating the day-to-day, making conciliation, dealing with accounts payable and receivable, this will give you the opportunity to analyze your finances, even if your focus is on other areas.
Not to mention the possibility of saving resources, dedicating to the operational focus and keeping the company lean, with few employees.
