The entrepreneur who closely monitors his business finances has better possibilities of calculating costs and purchases, tracking his sales potential, projecting the profit margin of his product or service, as well as making medium and long-term investments.
Starting to do this financial management is not at all difficult, just start a control of the company’s entrances and exits, making it possible to know the income and expenses of the business.
So, let’s see how to get started simply and quickly.
1. Why should I organize the company’s income and expenses?
A detailed control of the inflows and outflows (cash flow) is necessary so that the company management can work more safely.
This control is of the utmost importance, both to calculate working capital and to set dates for payments, receipts and also to reduce taxes.
By knowing how much enters and leaves the company, it is possible to make a better management, and consequently enable business continuity. Access our Complete Cash Flow Guide .
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2. First step: where to organize expenses and income
You can organize your company’s costs, expenses and revenues through:
- Excel spreadsheets
- Financial management software
- Pencil and notebook
The choice is up to you and is very personal. In all options there are pros and cons, but what matters is that the control is very detailed and that it can generate useful information for decision making.
We recommend the Management Software, as it allows for a better analysis, and many of these systems have tools to make the activity more productive.
Here at Capital Social, we solved the worst problem of using Financial Software that was its cost. We offer a cash control tool in all plans, which is integrated with our accounting, bringing benefits to both sides. Learn more about these benefits .
3. How to do the control
Daily, you will record the following items in your financial control:
The. Opening balance
It is the value that initiates financial control. This amount is how much you have available at the beginning of the period, not counting the amounts that will enter or be reduced.
It is what you get for selling the product or service. You must describe the date of receipt, the source of each revenue and record the form of payment (cash, postdated check, deposit or credit card) as well as the value of each entry.
These are the amounts you will pay. Be sure to record the destination of the expenses and how the payments were made. Classify between costs (which can be fixed or variable ) and expenses.
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This will give you some useful information at the end of the control.
- Operating balance – This is the financial result of daily transactions. Corresponds to the amount of money that came in during a stipulated period (month, week or day) and is obtained through the balance between expenses, inflows and outflows of the company during the stipulated time.
- Final balance – It is the sum of the initial balance with the operational balance. This value defines how much revenue has been added to a business, or if it closes in a negative margin, how much will be reduced from the initial balance.
4. What are the differences between Revenue, Costs and Expenses
It is very important to understand the differences between financial control items in order to generate good information. Come on.
Revenues are all the income generated by a company. It can be through its operation, such as the sale of products and services, financial with the receipt of interest on its applications or with the sale of investment items, such as machinery and equipment.
Costs are the company’s cash outflows that are directly related to the product and services produced. Examples of costs are the factory’s raw materials, its packaging, items for resale and production wages.
There is a difference between fixed costs, which do not change according to the volume (eg rental of a machine), and variable costs, which change according to the volume produced (eg raw material).
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Expenses are all expenses that refer to the maintenance of the company’s activity and are not directly related to the product. Examples include: Bank Fees, Telephone Accounts (if you are not a Teleservice company), Expenses with Cup and Kitchen and Subscription to Newspapers and Magazines.
5. Care when organizing income and expenses
- Separate the company’s financial control from your personal finances.
- Do not count checks returned or to be cleared as a positive balance.
- Overdue accounts must be collected quickly so as not to jeopardize working capital.
- Make a note of bank transactions, such as receiving deposits, transfers and withdrawals.
- Keep discipline up to date: be sure to note and make periodic updates on your financial control. This is critical to the success of your financial management.
- Try to make your annual financial projection. This facilitates the projection of expenses and income, avoiding unpleasant surprises.
Without secrecy, writing everything down is the easiest way to organize a company’s expenses and income. With organization and thorough control, it is possible to see how far your company’s financial destiny is going – and thus, think about what is the next step to be taken