Financial control is imperative for business survival and growth.
You can achieve it by setting up a comprehensive system of financial measures. The system provides the necessary analysis and tracking of your key financial data.
There are three main elements to ensuring financial control in your business:
1. Debtor Management
Active debtor management is keeping an eye on clients who owe you money and endeavouring to make sure that they pay you within your terms. If your terms are 30 days, you’re making sure that they’re paying you within 30 days.
The key to cash flow freedom is making sure that you’re paid for what you do. Some clients have their banks to provide them credit. That’s not your job. If you are providing a service and offer terms for that service, your invoices should be paid within those terms.
2. Tax Planning
We treat tax as a cost. Every business must pay tax but there is a way to minimise it. How do we that? Some of the techniques to use to lower taxes are: maximising business deductions, considering structural changes and how business owners get paid by the business.
3. Financial systems
It’s important that your bookkeeping and other systems link up to each other. It drives efficiency. Your financial systems need to communicate with each other. This ensures that data entered once flows through the next system to save time and improve back office efficiency.
Having a comprehensive system of financial measures and controls will provide the necessary analysis and tracking of your key financial data. This includes analysis and reporting of profit, cash flow, debtors and creditors. It also extends to matters such as the key drivers in your business that ultimately drive profit and cash.
Simply put, a system of financial measures and controls will provide you with a very clear picture of the financial performance of your business. You will also understand where the problem areas are. You can develop a plan to remediate them.