We know that managing a business requires attention and strategy, and one of the most important aspects to ensure a company’s success is maintaining efficient corporate financial control.
After all, without rigorous financial monitoring, an organization may face challenges that compromise its stability and growth. Companies of all sizes need to adopt practices that allow them to visualize inflows and outflows of resources, plan investments and anticipate possible financial difficulties.
Many business owners neglect corporate financial control because they believe that only large corporations need to worry about this management.
However, any business, regardless of size, must keep a detailed track of its finances to avoid problems. Let’s understand more?
What is corporate financial control?
In short, corporate financial control is a process that involves recording, monitoring and analyzing all financial transactions , allowing managers to make informed decisions aligned with business growth.
Proper financial management enables you to foresee problems, determine areas of improvement and maximize investments. Moreover, this management also facilitates bolder planning, shunning unexpected events that may undermine the financial well-being of the company.
How important is corporate financial control?
Efficient corporate financial control can provide a clear view of finances, allowing managers to know exactly what revenues, expenses and profits are, as well as enabling adequate financial planning.
With this control, it is possible to optimize resources, identify points of waste and improve business profitability .
Furthermore, companies that closely monitor their finances are able to make more accurate strategic decisions, preventing risks and ensuring greater financial stability.
How can the lack of this control affect your company?
See below how the lack of this management can affect your company’s results.
Unstable cash flow
The lack of effective financial control can generate an unstable cash flow , making it difficult to pay essential expenses and meet financial commitments.
Therefore, companies that do not monitor their movements end up facing difficulties in predicting periods of low revenue, compromising their operations.
Unfounded decisions
Making decisions without a financial basis can put the company in delicate situations. Without accurate information about income and expenses, managers may invest incorrectly, incur unnecessary debt or fail to take advantage of good growth opportunities.
Indebtedness
Companies that do not have adequate financial control run a high risk of debt. In other words, the lack of organization leads to poorly planned loans, high interest payments and financial dependence that can compromise the continuity of operations.
Waste of resources
Without strict financial surveillance, it is easy for organizations to overspend unnecessarily, usually without even noticing. Thus, wasteful and ineffective expenditures end up compromising the profitability of the business and inhibiting strategic investments.
Lack of planning
Without clear direction, it becomes difficult to establish long-term goals and strategies, making it difficult to expand the business and conquer new markets.
Impact on reputation
Finally, late payments, defaults and difficulties in honoring commitments can also harm the company’s image among suppliers, customers and investors.
What are the 4 pillars of financial management?
Corporate financial management is made up of four pillars: planning, control, analysis and decision-making.
Planning is necessary to establish financial objectives and policies, enabling the firm to have a clear direction of its operations. Control provides the assurance that every movement is strictly watched, so there are no nasty surprises and more predictability.
The third pillar, analysis of finances, enables us to spot trends and assess the firm’s performance over time.
And on the basis of all this data, the decision-making process becomes bolder, providing scope for strategic modifications that promote the stability and growth of the business.
In general, when these pillars are well applied, it is possible to achieve excellent business management.
How does a company’s financial control work?
Corporate financial management operates on the basis of precise documentation of all transactions, classification of income and expenditure, examination of financial ratios and establishment of strategies to maximize the use of resources.
This exercise demands discipline and the application of proper tools in order to provide accurate data and enable decision-making. In addition, the generation of periodic reports also enables evaluation of the business’s financial well-being and provides strategic realignment when needed.
How to perform financial control of a company: 7 steps
To ensure efficient financial control, it is necessary to adopt some fundamental practices. Follow the 7 steps below to learn how to carry out financial control in your company.
1. Set realistic financial goals
It is important to have clear and achievable goals within your company. Some common examples of financial goals include increasing profits and reducing costs .
2. Make a revenue forecast
Projecting revenue and making a revenue forecast helps anticipate difficulties and allows the company to make more assertive decisions. With a well-structured forecast, it is possible to avoid unpleasant surprises and adjust strategies in advance.
3. Separate personal accounts from business accounts
This is one of the frequent errors made by most new business owners since they do not understand how to run their finances. Nevertheless, separating your accounts helps in more efficient and transparent management of the business.
4. Analyze the profit margin
Knowing your business’s profit margin helps in maintaining proper pricing and a financially viable operation. That is, it helps you track these indicators from time to time so that you can modify sales strategies and minimize unnecessary expenses.
5. Diversify your income sources
Diversifying the means of generating revenue can also minimize financial risks. In this way, seeking new market niches, offering differentiated services or creating innovative products helps to make the company less vulnerable to crises and seasonality in the sector.
6. Create a reserve fund
Many people forget that keeping a financial reserve exclusively for unforeseen events protects the company against unexpected market fluctuations. Remember that this fund can be the difference between facing temporary difficulties with peace of mind or compromising the continuity of the business.
7. Perform internal audits
Finally, carrying out internal audits frequently makes it possible to identify flaws in financial management before they become serious problems. This process ensures greater transparency and efficiency in the management of resources.