Posted by D&V Accounting Services
Mar 23, 2015
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Though companies differ in products and services offered, nature and beliefs, one thing stays the same: all companies aim to expand their operations. To cement their place in the market and succeed in building a loyal client base, companies are always on the lookout for new initiatives that will aid their growth efforts.
However, for company growth and expansion to be feasible, it is not just financial capacity that is needed but also the ability to manage your company’s operations and finances well.
With this, you must establish financial controls that help you with your financial management as well as your operational efficiency.
What Do We Mean by Financial Controls?
Your financial controls dictate how you allocate, handle and overall direct your resource allocation. It helps you know how much you have, how much you can spend and where you can spend it on to help your growth efforts.
How Do You Create Efficient Financial Controls?
Being able to manage your finances well boils down to four things: managing your cash flow, assessing your purchases, assessing your collections and diversifying your assets.
Here’s how you can effectively handle these four core financial competencies to help your company’s financial controls:
Read: 4 Common Mistakes to Avoid in your Company's Finances
Developing your Company’s Financial Controls
Cash Flow Management
The financial strategy of your company will detail how funds will be used in the business. It is important to note that if the cash is not properly managed, your small business may suffer unaccounted financial losses.
Ensure that your strategy can effectively identify how much you need to allocate for your cash reserves. It also needs to help you determine how major expenses are to be paid.
Laying out effective financial management strategies ahead of time makes financial decisions easier to make.
Purchases
Develop detailed guidelines for all purchases made through the company’s finance department—particularly for massive purchases such as asset acquisition.
This allows you to determine which purchases are to be made with cash, with a line of credit or with a credit card. Detailed purchase guidelines also assist you in making the most out of suppliers’ terms. Your purchasing strategy should also specify if approvals from the higher ups are necessary when concerning a certain amount.
Collections
To make your financial management strategies both efficient and effective, it is important to have a detailed collections plan. Dedicate in-house staff to following up with overdue customers or turning them over to an outside agency.
Your collections strategy helps you specify late fees and deposit due dates. You can easily keep track of the deliveries of your products and services.
Remember that companies that don’t properly manage their own receivables will eventually suffer from devastating financial health crises.
Investments
Specific investment strategies generally don’t belong in written plans. However, it is highly advisable to include at least a set of general guidelines for your management.
Include details of the percentage of money invested in high-risk portfolios vs lower risk portfolios.
It is also advisable to indicate when approval is needed for changes to current investments or liquidation of investments in covering business necessities.
Being able to optimize your finances through these four core competencies positions your company in a place where growth is possible as you can now easily scale your financial processes should operational capacity increase.
In the end, these financial management strategies act as a guide for you and your company to know how to define financial controls and be able to use them as a tool for organizational growth.
Regardless of your financial position, growing your company’s reach takes organization and adaptive processes, making sure your company can handle all changes and successfully navigate an expansion without compromising on quality.
Read Next: Is it time for your Business to get Financial Planning Services?
Need Help in Navigating your Company’s Financing Options?
We have a wide expertise in handling the numbers of companies across various industries.
We also make it our duty to stay up to date on the latest trends in the accounting industry to make sure our clients’ data is safe with us. Contact us today and we’ll help you find the right solution for your needs.
Download our Outsourcing: How to Make it Work guide today and discover how can help in managing your company’s finances.
