For many entrepreneurs, the idea of maintaining corporate financial control may seem intimidating or even unnecessary, especially when focused on other operational or strategic aspects.
But without such a tool, your company remains at the mercy of events, sometimes taking wrong decisions that put it in a position to incur losses, instability, and in extreme cases, problems of viability and reputation.
On the other hand, when control is carried out effectively, your business becomes more resilient and capable of facing market challenges.
After all, this tool provides a clear view of your financial health, allows you to make well-informed decisions, identify the best growth opportunities , optimize costs, improve cash flow management and boost your competitiveness.
But what exactly is corporate financial control? Why is it so important? How can you implement it successfully? In this article, find all the details you need to know to master the subject! Check out the topics we have prepared for you:
What is corporate financial control?
Looking at this term, you might think it’s something complex to understand. Or, that it’s only for large companies. But regardless of the size of the business, the number of sales or employees, entrepreneurs need (and should!) take good care of their money.
In practice, corporate financial control involves monitoring and having quick access to the business’s financial flow — that is, inflows (receipts) and outflows (payments). In addition, it is also necessary to know who is in charge of each of these processes and to have the support of technology.
The rule is clear: when all information related to the company’s money is not updated automatically, the risk of errors is high. Incorrect entries, late bills and payment of fines are some of them.
The importance of corporate financial control
Have you noticed that although you sell a lot of things, the numbers just do not add up? Do you feel you should hire more employees if this would speed up your service, but you just don’t know whether you can afford this investment?
Corporate financial control provides the clarity you need to make decisions based on real data, identify potential challenges before they become bigger problems, and find lasting solutions.
So, don’t “put out fires”, like finding out today that the Simples tax is due tomorrow and not knowing where to get the money to pay it. With good financial management, these surprises don’t happen.
Check out more details below about the importance of managing your company’s finances well.
Control expenses and costs
Cutting costs, expenses and saving money is always on any entrepreneur’s radar. However, how can this be done without harming the company’s activities? This is when corporate financial control comes into play , providing the necessary clarity about the expenses that can be reduced.
After all, there is no point in cutting expenses if such a decision will have a negative impact on the company. One example is reducing the number of employees, when the entrepreneur’s greatest need is to have more people to serve customers.
Track your growth
How do you know if your company has really grown? A higher sales volume, depending on the type of product or service, does not always mean profit. After all, you need to calculate all the production costs, inputs used, etc.
For the newbie, this calculation is easy to do. However, as sales increase you can get lost in the calculations. Nothing’s worse, though, than watching money come into the business and still not know how to pay the bills.
That implies that by maintaining good financial control over your business, you can better monitor the growth of your business and know what needs to be adjusted to continue making a profit. For example, we discussed in the previous topic hiring more professionals to meet demand better.
Make strategic decisions based on real data
Did you know that your business may be making more money than you think? To be sure about your company’s financial situation, there’s no room for guesswork: you need to analyze the real data.
Corporate financial control gives you insight into what is really happening, helping you make assertive decisions.
Be prepared to face unexpected events
It is not possible to predict the future of a company and be sure whether it will be profitable or not. Even in positive scenarios, unexpected situations can happen. Therefore, you need to be prepared for financial contingencies.
This is only possible with good financial management. After all, to save money for the company’s cash flow, the accounts need to be up to date.
Plan investments
Opening a branch, buying more equipment and hiring more people: to make an assertive investment in the business you need to have your finances organized.
The other benefit of effective financial control is the better exploitation of opportunities, such as discounts and better payment conditions offered by suppliers.
Recognize the precise sources and destinations of your money.
Very important is to know the origin and destination of all funds of the company. In that way, you would not have visibility over your expenses and sales. Such lack of control may lead to poor decision and loss and even legal problems.
Other risks include filing incorrect tax returns or being charged penalties and interest for missing payments because of unawareness of financial matters and disorganization.
Make short, medium, and long-term plans
Every entrepreneur’s dream is to see their company grow, but often the focus is solely on operations . This leaves you with no time to think about the future.
Corporate financial control provides the clarity needed to define the company’s short, medium and long-term goals . By recording everything that comes in and goes out and analyzing these results, it is also possible to understand what steps are necessary to achieve the business’s objectives.
How can a lack of control affect your business?
If you neglect corporate financial control, your company may suffer a series of negative consequences. The impacts affect not only the performance and growth capacity of the business, but also the health of its finances, stability and even survival in the market.
Check out below some problems you may face when you don’t worry about knowing how to control your company’s finances:
<h3″>Cash flow instability
The lack of proper control means you can’t see your cash inflows and outflows , which can result in cash flow problems. This instability can make it difficult to pay your bills, obligations, employee salaries or keep up with supplier expenses, for example. All of this affects the continuity of operations.
Excessive debt
It presents an element of risk and damage to the financial controls exerted over the business since debt can amass on you unintentionally. Therefore, there might be higher debt levels, which will result in delayed payments for bills, more penalties, or high rates of interest; worse, bankruptcy might result as a result. Hence, that is a threat to survival itself of the business itself.
Poor resource utilization
Without having control, you might squander your business money in the following ways. To illustrate, unnecessary investment can be made in those procedures that do not have the potential to achieve your set goals. This reflects an ineffective operation and a reduction in profitability, hence unable to compete in the market.
Lack of basis for decision making
By neglecting corporate financial control, you compromise your ability to gain a clear understanding of the financial health of your business. This means that you cannot make well-informed strategic decisions, whether regarding investments or cost optimization. This creates a greater risk of making inappropriate choices, which harm the company’s growth and sustainability.
Lack of planning
Without proper control, you will have difficulty planning your company’s financial future . The business’s ability to adapt to changes is limited, preventing it from taking advantage of market opportunities, whether through strategic investments, sustainable growth plans, emergency reserves, etc.
Reputation issues
All the consequences arising from a lack of corporate financial control can negatively impact your business’s reputation. In other words, without accurate financial management, you can generate distrust among customers, investors and partners, damaging important business relationships and the company’s image in the market.