Financial controls every business must have

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. What can go wrong generally will when you least expect it. Knowing you have a real problem to solve can only happen if you know what you should be watching. I cannot see how any manager can be worthy of this title if they are not a good problem solver.

A business cannot survive without thorough financial controls. Financial controls wave the red flags and alert management to financial problems. A good reporting system is essential to the support of financial controls, this functionality can be found in most good small business accounting software. For example good small business accounting software should produce reports that can compare the values of sales versus expenses in the budget to those resulting from actual activities. You should think through the critical numbers and ratios you need to review on a regular basis, keep it simple to begin with and then design the reports around them.

You should constantly be monitoring the behaviour of your margins on all products and services you sell and any changes should immediately receive your focused attention. Pay close attention to any minor change in the volume of products sold or the expected margins as this behaviour can quickly lead to a significant decrease in profits. Do not under any circumstances let fixed costs deviate from the plan, especially in the early stages of the financial year. 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.