Here are some tips on the key areas to focus on when assessing your business’s financial controls:
Accounting system: are you recognising and recording all financial information, detailing income flows, fixed overheads and variable expenses? This information will form the basis of key decisions, so it is important that the recording process is robust.
Analysing financial statements: once information is accurately recorded it can be used to monitor the vital signs of the business. The balance sheet is an important measure of business health and value at a specific point in time. The income statement measures revenue and related expenses during a specified period of time, giving a good indication of business performance. Taking a step back and analysing your costs will help you to see where those key savings can be made.
Operating budget: an essential step in good budgeting is making reliable forecasts of revenue and expenses, which can be done by projecting past trends into the future, and predicting how the future will affect your business (forecast = projections + predictions).
Cash plan: cashflow is the lifeblood of any business. More businesses fail due to lack of cash than lack of profit. Managing the amount of cash that is coming in and going out will ensure controls are maintained and that the business remains liquid.
