Implementing better financial controls

Good business managers spend a significant portion of their time solving business problems. Problems have a habit of leaping out at you when you least expect them. You will never be able to spot a problem if you don’t know what to watch out for. There is no place in a management team for a manager who is not adept at problem resolution.

It is essential that every business has solid financial controls. Financial controls should be specifically designed to detect financial problems and immediately bring them to the attention of managers. A good place to start designing financial controls is around the reports you can run from small business accounting software. For example actual costs versus budgeted costs, differences in the performance in current and previous periods of revenue and expenses, behaviour of cash flows and profits are all things you have to be able to comprehensively report and therefore should be easy to generate from small business accounting software packages. Think carefully about what you want to track and monitor, pick a small group of key numbers and ratios and then design and test the reports to make sure you get the information you need, when you need it.

Margin changes can spell trouble, so you should be vigilantly tracking these and have a mechanism to alert you when changes occur. Watch your margins and changes in the number of sales, especially if you are running a business which relies upon volume sales for income as losses multiply at a frightening rate if the causes are not immediately arrested. Never take your eye of the fixed expenses of the business in the early part of the year and make sure they follow the budget. Good small business accounting software should let you easily create debtors reports (people who owe you money) and the results in these reports should be monitored closely.

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.